For Jensen Huang and chip maker maker Nvidia, 2018 was a year to forget.
The global economy was slowing. Semiconductor demand was dropping, and the Trump Administration was escalating a trade war with China.
Shares of Nvidia (NVDA) slumped badly — 54%, in fact — even as the company’s chips were beloved by companies building video games and other applications that needed computing power to display complex graphics.
Image source: Getty Images.
Nvidia became the future
Then, things really happened. First, we must account for a 4-for-1 stock split in July 2021.
As that happened, tech giants realized those graphical chips could handle lots and lots of data. Artificial intelligence was coming long, and its promoters realized the technology, even the early versions, needed chips that could handle all that data at lightning speeds.
And there was Nvidia again. After Wednesday’s close, the company founded by Huang in 1993 will announce results for the fourth quarter that ended on Jan. 31.
The Wall Street estimate is for earnings of around $4.60 a share, up more than 600% from 65 cents a year ago.
Related: Cathie Wood buys major tech stock on sale, sells two AI stocks
Revenue is projected at $20.5 billion, up 238% from a year earlier. Revenue for its data center business alone may be $17 billion. Gaming revenue is expected to hit $2.7 billion.
And who knows what will happen if Nvidia beats the Street estimates and guides higher. Maybe another stock split?
The stock finished Friday at $726.13. Its market capitalization is $1.8 trillion, trailing only Microsoft (MSFT) and Apple (AAPL,) and Saudi Aramco, the Saudi oil giant, in a list of the world’s most valuable companies.
Let’s say you bought 100 Nvidia shares at the end of 2018. Adjusting for the split later on, the price would be $33. Today, your stake would be worth $726,700, up 2,100%.
Huang, who owns 3.6% of Nvidia’s shares, is worth more than $60 billion and has donated millions to Oregon State University and Stanford, where he earned degrees in electrical engineering.
More than big enough to move markets
Nvidia is, by far, the most important earnings report of the week and maybe for all of this year’s first-quarter earnings. (Meta Platforms (META) could argue the point.)
Why? Nvidia is already up nearly 47% on the year- after a 238% gain in 2023. And everybody playing in the space wants their chips and graphics processing units (GPUs).
Meta is reportedly about to shell out $10 billion or more to get 350,000 H-100 GPUs, one of Nvidia’s key products, to power its AI operations.
Nvidia’s earnings will likely come in at the street estimate or higher.
Then comes the guidance.
And a question: Are buyers double-or-triple ordering Nvidia products to get the bare minimum they need? That happened in the late 1990s and led to the dot.com bust.
If Nvidia’s guidance is less than expected, one can expect that the computers that run most stock trading will shout, “Sell!”
And a stock market that’s a touch on edge will head south just as it did on Tuesday when the consumer price index report showed inflation higher than expected.
The big rally takes a breather
This past week ended in a jittery mood for markets. The S&P 500, the Dow Jones industrials, the Nasdaq Composite Index, and the Nasdaq-100 Index all fell (slightly) for the first time after six straight weeks of gains.
It was just the second weekly loss for the group in the last 16 weeks, dating to the start of the current rally at the end of October.
Bond yields also jumped, pushing mortgage rates higher.
A big weight on the markets was the impatience of many investors (and/or the algorithms that drive their trading) for the Federal Reserve to cut its key lending rate from 5.25% to 5.5%.
Many members of the Fed and presidents of the 12 Federal Reserve banks opined last week that the central bank was right to wait to see inflation fall lower, maybe to the Fed’s goal of 2% a year. (Unless something bad happens.)
The waiting now looks like it will end in summer at the earliest because the last bits of inflation-fighting take longer to bear fruit.
So, stocks slumped badly on Tuesday and morosely on Friday.
Walmart, Home Depot, and existing home sales on tap
In addition to Nvidia, the week ahead features a broad spectrum of reports from U.S.-domiciled companies.
Retail giants Walmart (WMT) and Home Depot (HD) report before Tuesday’s opening and are expected to show good results, though nothing like Nvidia.
More Wall Street Analysts:
Cybersecurity kingpin Palo Alto Networks (PANW) will report after Tuesday’s close. Its shares jumped 111% in 2023 and are up 24.4% this year.
Joining Nvidia on Wednesday are Analog Devices (ADI) , automation software company Synopsis (SNPS) , crafting retailer Etsy (ETSY,) and racing and gambling company Churchill Downs (CHDN) .
Thursday brings Intuit (INTU) and Booking.com (BKNG) .
Friday offers Coca-Cola EuroPacific Partners (CCEP) , the bottling arm of Coca-Cola that’s responsible for everything in Europe and Asia. The stock was just added to the Nasdaq-100 Index in December.
There will be some important economic reports as well.
-
The Index of Leading Economic Indicators, the only government report that looks ahead, arrives Tuesday morning. Estimates suggest a small decline.
-
Minutes from the Fed’s Jan. 39-31 meeting, due Wednesday. Wall Street wonks will parse the minutes from the Fed’s Jan. 30-31 meeting close for more insight on why rates aren’t coming down.
-
Existing home sales. This is the monthly report from the National Association of Realtors monthly report that looks at the national housing market. Economists see a modest gain at best.
But Nvidia will likely be the week’s star, good or bad.
Related: Veteran fund manager picks favorite stocks for 2024