Unpacking Nvidia’s Earnings

by | May 23, 2024

Unpacking Nvidia’s Earnings

Yesterday I wrote to you at length about Nvidia’s first quarter earnings release. And oh boy it was more than we could have ever expected.

So today we’re going to unpack everything that’s unfolded.

Let’s get started.

Nvidia’s revenue beat Wall Street’s highest expectations — even after Wall Street Analysts revised their projections higher multiple times.

As a reminder, Wall Street’s consensus estimates pegged Nvidia’s revenue at $24.6 billion. With some bullish more retail-ish investors thinking that their revenue could come in around $26 billion — which Wall Street analysts thought was quite lofty.

But lo and behold, Nvidia’s first quarter revenue came in at $26 billion, smashing through Wall Street’s highest expectations and meeting even the hopes of the most bullish of Nvidia investors.

First-quarter revenue is up 262% from the same quarter last year, data-center revenue is up 427%, and adjusted earnings per share (EPS) is up 461%.

Following the earnings release, Nvidia rose from $949.50 to $1,007 in after-hours trading.

Nvidia also revised and raised its guidance for the second quarter, to $28 billion, far ahead of the $26.7 billion FactSet consensus and in line with what analysts said the buy side was looking for.

Some news on the technological innovation front also made investors more bullish.

Nvidia shared that its new Blackwell AI chips would start shipping in the current quarter and demand for the processors might exceed supply “well into next year.”

Another interesting development came to light from some remarks from Nvidia Chief Financial Officer Colette Kress, who told analysts about a new area that is rapidly growing: sovereign AI.

Many countries across the world are building up their domestic computing capacity. With many procuring and operating a sovereign AI cloud in collaboration with various state-owned telecommunication providers and utility companies, others are sponsoring local cloud companies to provide a shared AI computing platform for public and private sector use.

She shared that:

“From nothing the previous year, we believe sovereign-AI revenue can approach the high, single-digit billions this year. The importance of AI has caught the attention of every nation.”

This is essentially a brand new multibillion-dollar business Nvidia has created.

Even Bigger News

But that’s not even the biggest news of all…

As I suggested during our live impromptu training for a lot of my bullishness, NVDA unveiled a 10-for-1 stock split on yesterday evening’s earnings call and even announced a 150% increase in its quarterly dividend.

This made shares surge even more in after-hours trading and altogether prompted the stock to rise more than 10% today by noon.

But here’s the thing about stock splits: they don’t change the underlying value of the company. The market cap remains the same. You see, if you owned one share of Nvidia right now, once the split happened you would then own 10 shares, and the prices would be cut in 1/10th. So the underlying market cap doesn’t change.

However, historically, after a big tech company splits we often see it soar. We’ve observed this trend time and time again with Apple.

So why is that?

Some investors view the stock as a better deal at a lower price. When in reality it doesn’t actually change how good or bad of a deal the underlying position is given that its market cap remains the same.

But for most retail investors, a $100 stock is a lot more attractive to buy than a $1,000 stock. It tends to create a flood of retail money because they feel like they’re getting a cheaper stock (they’re not haha), but that’s the crux of why many of these big tech companies soar after splitting. They are opening up their stock to a whole new market of smaller accounts who would have previously been less equipped to be able to trade Nvidia at over $1,000 per share.

Here’s What We Did Yesterday

Shortly before Nvidia’s earnings at 3:00 PM, Graham and I hosted a free class where we would discuss some of our earnings predictions and put on some Trades to take advantage of any potential moves in Nvidia.

I’m sure those of you who attended and took the free trades are immensely glad you did — they’re up big.

For those of you who missed it, we actually ended up predicting that NVIDIA would likely announce a stock split and made several bullish trades on these positive expectations and gave them to attendees for free.

We traded NVDA directly and the leveraged version of Nvidia (NVDL) and even the semiconductor ETF as a play on earnings.

Here’s how they’re doing:

I hope every one of you was able to get a piece of the action too! I am always proud when we can share trades for free like this for anyone to take advantage of…  Nvidia’s earnings release was arguably the most awaited one of the season and it certainly did not disappoint.

Great job everybody!

— Nate Tucci

P.S. Not only was Nvidia a huge score, but it helped the entire market rip upward today. Which also led to our FOURTH Automated Options win in a row with an automatic exit this morning. We’re now at a 100% win rate so far with all the members and raking in some pretty nice profits.

If you’re not in yet, I don’t know what else to say! Just get in! Join Automated Options right now before tomorrow’s trade!

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