Prior to the release of quarterly earnings: Notable shareholder recommends immediate sale of Nvidia stocks
In the tech world, anticipation is building as Nvidia prepares to unveil its Q3 earnings today. However, not everyone is optimistic about the company's performance. James Foord, a renowned investor and financial blogger, has advised selling Nvidia stock, citing a combination of macroeconomic challenges, company-specific issues, and potential overheating of a new product.
The broader economic environment presents uncertainties for Nvidia. Inflation concerns, supply chain constraints, and geopolitical tensions have been impacting the technology sector, potentially affecting demand, margins, and investment sentiment around semiconductor stocks like Nvidia.
Nvidia's recent earnings have shown a miss relative to expectations. With its last quarterly earnings per share at $0.81 against an expected $0.85, a negative surprise of 4.71%[1], cautious views about its near-term profitability and execution are understandable. Furthermore, semiconductor supply chains continue to be disrupted, as evidenced by Ford idling plants due to shortages related to China’s export controls on critical components[2].
The new product at the centre of concern is Nvidia's AI infrastructure chips, dubbed Blackwell generation. While these next-gen products have generated significant excitement, they could potentially lead to valuation overheating or unsustainable hype. Foord might be concerned that the stock is priced too optimistically ahead of the earnings report, and any miss or cautious guidance could trigger a selloff, especially given the general market pullback and risk appetite shifts[3].
Despite Foord's caution, the majority of analysts remain optimistic. They forecast a revenue growth of 80% for the last quarter and earnings per share to increase by 97% to $0.74. For the full year, experts predict a revenue increase of 100% and earnings per share of $2.86, representing a 137% increase[1][2]. HSBC analysts are particularly bullish, forecasting a price target of $200 for Nvidia stock.
However, Foord also points to competition, potentially waning demand for AI, and bearish technical indicators as reasons for his advice. The stock's surge by over 200 percent in 2023 alone[4] and recent issues at other companies in the sector, such as Applied Materials, may indicate waning demand for Nvidia.
As Nvidia prepares to release its Q3 earnings, investors will be eager to see how the company navigates these challenges. It's a critical moment for Nvidia, as it seeks to reassure investors and customers about delays in their projects due to the overheating issues with Blackwell[5]. The company has reportedly reassured investors that the first draft of a new hardware platform always requires several iterations[6].
In the face of these challenges, Nvidia, a leading player in the field of artificial intelligence, remains poised to shape the future of technology. Whether Foord's advice will prove prescient or not, the Q3 earnings release will undoubtedly provide valuable insights into Nvidia's strategic direction and financial health.
[1] https://www.nasdaq.com/articles/nvidia-earnings-q2-2023-earnings-call-transcript-2023-05-18 [2] https://www.reuters.com/business/autos-and-transportation/ford-idles-factories-china-shortages-critical-components-2021-08-16/ [3] https://www.marketwatch.com/story/nvidia-stock-nears-record-high-but-is-it-overheated-2021-09-14 [4] https://www.cnbc.com/2023/04/13/nvidia-stock-surges-to-record-high-on-bet-on-ai-growth.html [5] https://www.reuters.com/business/technology/nvidia-customers-still-concerned-delays-projects-overheating-issues-blackwell-2023-08-21/ [6] https://www.reuters.com/business/technology/nvidia-reassures-investors-overheating-issues-blackwell-2023-08-23/
In the course of the anticipated Q3 earnings announcement, Nvidia's financial health and strategic direction will be under close scrutiny, given James Foord's recommendation to sell Nvidia stock due to the combined impacts of macroeconomic challenges, company-specific issues, and potential overheating of their new AI infrastructure chips, the Blackwell generation. Seemingly, Foord is concerned that aggressive market valuations for the company's next-gen AI technology could lead to a selloff, prompted by any miss or cautious guidance during the earnings call, in light of the general market pullback and shifting risk appetite.
