TheBRRR’s Thoughts

Nvdia’s blowout earnings on Wednesday triggered a massive tech-lead rally on Thursday.

With the Nasdaq up 3% on the day (the strongest single-day in years), NVDA itself soared from $670 pre-earnings to $800 right now - a whopping 18%.

The company reported $22B in revenue with monopoly-like gross margins of 76%.

Interestingly, the major crypto assets have underperformed this week as the market continues to reduce expectations of interest rate cuts starting in May.

We expect this underperformance to be short-lived as the Fed changes its tune sooner rather than later.

The bitcoin weakness is particularly interesting, indicating just how tightly correlated it is to global liquidity conditions.

Loose monetary & fiscal policy expectations = bitcoin soars
Tight expectations = bitcoin struggles

However there is a sector within crypto catching a major bid at the moment. That sector sits at the intersection of crypto and AI, with projects offering decentralized solutions for data storage, compute and model training.

We’ll do a deepdive explaining the tech and the value propositions soon, but for those looking to kick off research early, the leaders appear to be Filecoin ($FIL), Bitensor ($TAO) and Render ($RNDR).

NVDA Smokes Estimates, Stock Soars

• WHAT HAPPENED
  

  • Nvidia Corporation reported fiscal Q4 2024 earnings, highlighting a significant upward trajectory with a fiscal Q1 2025 outlook implying a run-rate EPS of $22

  • It revealed a 265% revenue increase, pushing its market valuation towards $2 trillion and highlighting its dominance in accelerated computing and generative AI.

  • Post-earnings, Nvidia shares surged 18% and sit around $806.

  • The company's solid performance and optimistic Q1 guidance underscore its dominant position, especially in AI accelerators, driving a valuation at around 33x run-rate earnings.
    

  WHY IT MATTERS:
  

  • Continued Growth: High demand for AI accelerators, leadership in AI, and upcoming product launches (H200 and B100 AI accelerators) suggest sustained growth beyond Q1.

  • Software and Automotive Opportunities: Nvidia eyes significant opportunities in software (a $300 billion TAM for AI Enterprise and Omniverse Enterprise) and automotive, with a $300 billion TAM, which are barely tapped.

  • China Market Impact: Sanctions against AI chip exports to China have been fully realized, limiting further downside risk to Nvidia’s growth from this market.
    

Seeking Alpha

Goldman Revises Rate Cut Forecasts Amidst Fed Chatter

• WHAT HAPPENED:

  • In a swift change of sentiment, the market has dialed back its expectations of imminent Federal Reserve rate cuts, moving from anticipating over seven cuts in 2024 to now seeing just a 25% chance of four cuts.

  • Goldman Sachs, led by Jan Hatzius, adjusted their forecasts in light of recent hawkish Federal Reserve commentary, pushing the expected first rate cut from May to June 2024, and predicting a total of four cuts in 2024, down from five.

• DETAILS OF GOLDMAN'S FORECAST:

  • 2024 Forecast: Now includes cuts in June, July, September, and December, totaling four rate cuts.

  • 2025 Expectations: An additional cut has been added, expecting four quarterly cuts, up from three previously forecasted.

  • Terminal Rate Forecast: Unchanged at 3.25-3.5%.

• ANALYSIS:

  • Goldman's shift reflects a balancing act between hawkish realities and dovish hopes, maintaining a low terminal rate outlook while adjusting the timing and number of rate cuts.

  • Recent comments from Fed officials, including Governor Waller and Presidents Harker, Kashkari, and Bostic, suggest a cautious approach to rate cuts, prioritizing more definitive inflation data and economic indicators over immediate action.

• WHY IT MATTERS:

  • This recalibration in expectations highlights a broader market realization that the Federal Reserve is likely to maintain a cautious stance in the near term, with rate cuts contingent on sustained inflation moderation and economic conditions.

  • Goldman's analysis suggests a shift in Fed thinking, with a reduced emphasis on immediate rate cuts and a more measured approach to achieving long-term inflation targets and economic stability.

• CONCLUSION:

  • As the narrative around Federal Reserve policy shifts from aggressive dovish expectations to a more tempered outlook, the focus remains on inflation trends, economic performance, and the timing of future rate adjustments. Goldman Sachs' updated forecast underscores the ongoing uncertainty and the Fed's cautious path forward, highlighting the importance of forthcoming economic data in shaping monetary policy decisions.

Zerohedge

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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