Here are the takeaways from today’s Morning Brief, which you can register to receive every morning in your mailbox accompanied by:
NVIDIA (NVDA) is at the center of a new meme stock market rally.
Its earnings report next Wednesday will put that theme to the test. Again.
Wedbush analyst Dan Ives, the most creative voice on Wall Street today, combining dramatic flair with prescient, unapologetic optimism on AI’s investment case, called Nvidia’s quarterly results from last May a “breathtaking” event.
“The Street was waiting for last night’s Nvidia quarter and guidance to gauge the scale of this AI demand, with many skeptics saying an AI bubble was forming and, instead, Jensen & Co. provided advice for the ages,” Ives wrote at the time.
And Ives was just getting started.
In August, Nvidia increase in revenue forecast It was a “dropping the mic” moment for the company, according to Ives.
In November, Nvidia CEO Jensen Huang was crowned by Ives as the “Godfather of AI” after the company further raised its sales forecasts. Ives added that the company’s outlook for November was “guidance heard around the world as the AI revolution accelerates through 2024 for the broader technology sector.”
Three months later, what do we have on the market? Anything and everything with AI is up for bid as Nvidia has become the third largest company in the market.
For example, on Wednesday evening, the chip giant disclosed modest stock investments in arm wallets (ARM), SoundHound AI (HER) and biotechnology company Recursion Pharmaceuticals (RXRX).
Stocks of all three rebounded on Thursday following the news, including SoundHound, which gained 60% following the news. Nvidia owned approximately 1.5% of the company’s outstanding shares as of December 31.
Add to that the action seen in Arm shares last week and the now multi-week rally in cloud storage play Super Micro Computer (SMCI) – which has seen its stock gain around 200% in one month and almost 1,000% in the last 12 months – and we can see that a real craze for AI has erupted on the stock market. Where the mere suggestion that a company could benefit from accelerating AI spending is enough to raise the stakes.
Today, as Ives noted in his May 2023 report, the idea that an AI-powered market recovery hangs by a thread that only Nvidia can sew tightly is far from a reality. new idea. So perhaps it’s our mistake to view next week’s Nvidia results as having significance far beyond the fortunes of Nvidia itself.
Additionally, the outlook for corporate earnings, which could support a recovery beyond AI, continues to improve. Meanwhile, the number of times business leaders mentioned AI earnings calls have actually declined lately.
And unlike the meme stock rally of 2021 in which fundamental stories were randomly changed to explain why a stock could double or triple in a few trading days, enthusiasm for AI games rests on a more solid foundation of real business spending.
But given where this investment sits on Nvidia’s income statement, it’s hard to shake the feeling that these results will mean something bigger for the stock rally. Even if we’ve already seen this movie.
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