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Artificial Intelligence Tipping Point
Please click here for an enlarged version of the chart of NVIDIA Corp (NASDAQ: NVDA).
Note the following:
- This article is about the big picture, not an individual stock. The chart of NVDA stock is being used to illustrate the point.
- The chart shows when NVDA pulled back on extreme positioning prior to the earnings release. Please read yesterday’s Morning Capsule for details.
- The chart shows NVDA fell below the trendline prior to the release of earnings, triggering many sell signals in traditional technical analysis. This is a perfect illustration as to why it is important to not depend only on traditional technical analysis. Investors should use a sophisticated system such as ZYX Change Method with six comprehensive screens.
- The chart shows the jump up after the earnings release after hours yesterday.
- Nvidia beat earnings. Here are the details:
- NVDA beat whisper numbers. Revenue came at $22.1B vs. $22B whisper number. Earnings are at $5.16 vs. $5 whisper number. As we have written before, whisper numbers were much higher than consensus.
- For the current quarter, NVDA is forecasting $24B at the midpoint vs. $22.2B consensus.
- Data center results were higher due to demand for Nvidia GPUs for generative AI.
- Hyperscalers accounted for more than half the data center revenue.
- In The Arora Report analysis, there is a great surprise in NVDA earnings that demands investors’ attention.
- AI inference shipments were about 40% of AI related shipments.
- The consensus for AI inference shipments was 5%.
- In plain English, AI inference means AI trained models are actually being used.
- AI inference correlates with revenue generation. In contrast, AI training correlates to capital spend.
- In The Arora Report analysis, the inference shipment data indicates that AI is being adopted much faster than anybody anticipated before yesterday evening.
- In The Arora Report analysis, if the competition does not heat up, NVDA is on track to achieve $45 - $50 in earnings in 2027. If this comes true, on this basis, NVDA is the cheapest tech stock. Of course the reality is that competition will heat up. Nonetheless, investors need to be aware that based on the current trajectory, NVDA is not an expensive ...