NVDA Earnings And The State Of The Market

Nvidia (NVDA) reported its much anticipated 4Q earnings after the close. It was a mixed bag. On the one hand, revenue growth continues to astound. 4Q revenue of $39.3 billion was up 78% compared to a year ago and 12% compared to last quarter. Further, NVDA guided 1Q revenue to $43 billion.

On the other hand, Gross Margin is being squeezed. 4Q Non-GAAP Gross Margin was 73.5% compared to its quarterly peak of 78.9% in the 1Q. Further, NVDA guided 1Q Non-GAAP Gross Margin to 71%. For whatever reason, NVDA’s Gross Margin – and therefore its profitability – is being squeezed. As a result, shares are currently flat in the after hours. It will be quite interesting to see how things play out during Thursday’s session.

Overall, the major indexes have broken below their 50 Day Moving Averages (DMA). In addition to the technical damage, the market is quite expensive. According to Spencer Jakab in yesterday’s WSJ, developed market growth stocks are in the 98th percentile of their historical valuations over the last 35 years based on the most reliable cyclically adjusted measures used by Research Affiliates (“Stocks Have a Big, Expensive Problem” [SUBSCRIPTION REQUIRED]). Walmart (WMT) got hit last week in reaction to earnings simply because it had become too expensive (“A Correction Is Upon Us”, Top Gun Financial, Friday February 21).

Leading momentum stocks have been crushed in the last week. Palantir (PLTR) is down 28% over the last six sessions. Hims & Hers Health (HIMS) is off 42% over a similar timeframe. MicroStrategy (MSTR) – the popular leveraged Bitcoin stock play led by Michael Saylor – has been cut in half since its November high.