TheBRRR’s Thoughts

US markets were closed today, but trading did resume in China after a 10-day pause for Lunar New Year celebrations. At the first sign of weakness, it appears the CCP’s “Plunge Protection Team” (aka sovereign investment firm) stepped in to buy billions in stock.

Looking ahead to this week, Nvidia will unveil quarterly earnings. The report will set the tone for the rest of the tech market for the days and weeks to come.

Options markets are pricing in a 10% move for NVDA in either direction, implying $360B in marketcap volatility for the $1.8T company.

Blockbuster earnings have fueled much of NVDA’s run over the last 18 months, so expectations continue to be sky-high. The stock is a multiiyear, no-brainer, buy-and-hold in our portfolio, but we’re cautious headed into earnings after such a massive surge to start the year.

That just means we’re holding our existing position- no added leverage/exposure in the lead up to the report.

Nvidia's Earnings Deep Dive: A Data-Centric Preview

Expectations and Growth Analysis: Nvidia, standing at the forefront of the AI revolution, heads into its Q4 earnings with sky-high expectations. Wall Street's consensus pins adjusted Q4 EPS at a staggering $4.60, marking an over 700% surge from the previous year's 65 cents. Revenue forecasts suggest a leap to $20.43 billion, spotlighting Nvidia's explosive growth trajectory​​.

Year-over-Year and Quarterly Growth Highlights: The anticipation builds on a phenomenal year for Nvidia, with its stock price soaring 46.6% in 2024 following a 238% climb in 2023. This growth narrative is underpinned by Nvidia's dominance in AI chip demand, fueling investor optimism for sustained revenue and profit expansion​​.

Sales Data Insights: Nvidia's journey to becoming a trillion-dollar chip company was catalyzed by its integral role in powering AI applications, including the widely acclaimed ChatGPT. The company's data center revenue, a critical segment housing the prized H100 chip, ballooned 279% YOY to $14.51 billion. Guidance for Q4 FY24 sales stands ambitiously at $20 billion, more than doubling year-over-year figures​​​​.

Investor Watch Points:

• AI Demand: Nvidia's positioning as the AI linchpin, with applications spanning from data centers to autonomous vehicles, remains a key narrative. The earnings will test the depth and durability of AI-driven market enthusiasm.

• Market Influence: Nvidia's performance doesn't just reflect its own growth but acts as a bellwether for tech and AI sectors at large. A deviation from expectations could sway market sentiments broadly, underscoring Nvidia's market-moving potential​​​​.

• Competition and Market Share: Amid surging demand, Nvidia's market share and competitive stance, especially against rivals like AMD, will be scrutinized. With AMD's MI300X AI chips on the horizon, Nvidia's response and strategy to maintain its leadership will be critical​​​​.

• Volatility and Market Cap Implications: With option markets bracing for significant post-earnings moves, the implications for Nvidia's market cap—and by extension, the broader market—could be profound. An 11% stock price swing translates to a $200 billion valuation shift, a figure surpassing the total market cap of many S&P 500 companies​​.

Conclusion: As Nvidia approaches its earnings release, the stakes are high, not just for the company but for the broader tech and AI markets. The data points to an unprecedented growth story, underpinned by AI's ascendancy and Nvidia's central role therein. Investors and market watchers alike await with bated breath, knowing well that Nvidia's numbers could signal broader market movements and set the tone for tech investment narratives in the coming months.

Chinese Markets Reopen After Lunar New Year

What Happened:

• Chinese stocks reopened on February 19, 2024, after a 10-day Lunar New Year break, initially rising on strong travel and tourism data.

• Early gains dissipated as investors sold off due to a lack of significant policy action from Beijing, reflecting broader economic concerns including deflation and a property crisis.

• China's "plunge protection team" intervened, propelling stocks to session highs. Notable ETFs like the China AMC CSI 500 ETF and Harvest CSI 500 ETF saw record turnovers, suggesting state-backed support.

• The CSI 500 Index reduced its losses to 1.5%, while the CSI 300 Index climbed to close up 1.2%.

Why It Matters:

• The government's intervention underscores its dedication to market stability amid economic challenges, spotlighting the reliance on state mechanisms to influence market dynamics.

• Raises questions about the sustainability of such interventions and their long-term impact on investor confidence in Chinese equities.

• Highlights a complex investment landscape, contrasting with Japan's overvalued market despite its own economic and demographic challenges.

• Reflects broader global concerns over China's economic health, the effectiveness of policy measures to stimulate growth, and the potential implications for international investors navigating Asian markets.

Zerohedge

Got feedback? Follow the writer on Twitter @frank_locascio and send a message.

The BRRR is meant for informational purposes only. It is not investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.ll