TL;DR: NVIDIA crushed earnings again, but cautious guidance tied to China knocked the stock down pre-market. It quickly bounced back as analysts raised targets. The tension right now is short-term uncertainty vs long-term AI dominance.
NVIDIA just dropped earnings, and wow… it was a ride.
Revenue and profits surged, the company added billions in market value, but the stock still dipped right after the call. Then it flipped back green. Classic NVIDIA earnings day roller coaster.
So what happened? Guidance came in fine, but not quite as high as the “whisper numbers” traders were hoping for. The CFO pointed to a couple of sticking points:
- China is messy. Between shipping issues and new rules discouraging local companies from buying NVIDIA chips, the outlook is cloudy.
- There’s also political noise about possible tariffs on China-related revenue, though management made it clear nothing official is on paper yet.
On the flip side, the CEO said NVIDIA has a way to rework its Blackwell chips for China if needed, which could unlock a massive opportunity if negotiations go well.
Despite the cautious tone, Wall Street is still all-in. Multiple firms raised their price targets, and analysts keep pointing to the insane demand for AI infrastructure. Hyperscalers are spending like crazy, and some see NVIDIA grabbing a third of the entire chip market in the years ahead. AMD isn’t seen as a serious threat-at least not yet.
Here’s how I see it:
NVIDIA basically created the modern AI market. Long-term demand looks unstoppable, but the near-term is clouded by China risk. The stock’s quick recovery shows that many investors see dips as buying opportunities rather than red flags.
What do you guys think?
Do you see this as a chance to add to a long-term AI leader, or does the uncertainty around China keep you on the sidelines?
NVIDIA’s Earnings: Cautious Guidance or Just a Buying Opportunity?
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Posted by Optionslab
2 Comments
What I think is that the gains from the quarterly results were already priced in prior to earnings. Look at the growth of the stock between quarterly results: it matched what they said they would do last quarter, and the stock went up. Since there were no major downturns in the market, the stock price gradually climbed during the quarter.
We experienced some pre-earnings volatility, look at the share price for the past few weeks, pretty decent swings.
The dip earlier in the year aside, NVDIA has been trading with P/E’s in the 50’s.
NVIDIA’s Forward PE Ratio for today is 40.89.
So, for the share to maintain the same valuation (in the 50’s), based on the recently announced results (the forward looking results), the share price needs to go up this quarter. It will likely slowly climb until the next quarterly earnings based on the expected EPS.
Obviously, there are many factors and ways to estimate valuation of a stock, but this gives you a rough ball park on what you can expect.
There is a nice series of charts from Chart Kid Matt (works for Ritzholt Wealth Management). NVDA’s current forward earnings p/e is 33 below its historical average of 36. Also, the earnings growth have outpaced price growth. What you’re probably seeing is normal stuff that comes with a company that is the biggest by market cap.