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NVIDIA's Q4 Earnings Blowout: Buy, sell or hold?
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Bracing for the Biggest Day This Week: How Will Nvidia's Earnings and Fed Minutes Make Waves in the Market?

Moomoo News Global joined discussion · Feb 21 03:52
Investors are gearing up for the heaviest trading day of the week on Wednesday. Specifically, the Federal Reserve is scheduled to release the January FOMC meeting minutes at 2:00 p.m., which are expected to furnish the market with further clues into the outlook for interest rates. Additionally, $NVIDIA(NVDA.US)$ is poised to report its Q4 earnings after the market closes. As the most highly anticipated and promising AI stock, Nvidia's financial report is crucial to maintaining faith in the AI industry and holds significant implications for market sentiment and the next stage of the US stock market.
What Clues Will the January Fed Minutes Reveal After Stronger-than-Expected CPI and PPI Data Intensify This Year's Wait-and-See Attitude Towards Interest Rate Cuts?
A series of recent economic data releases have revealed that despite the Fed's aggressive interest rate hikes last year, which saw rates reach a 22-year high of 5.25%-5.5% since July 2023, the US economy has unexpectedly shown resilience. However, last week's release of the January CPI and PPI reports both exceeded expectations, suggesting that the final mile of the battle against inflation may not be an easy one. Meanwhile, the effects of the Red Sea Crisis are beginning to show in economic data, which could worsen inflationary risks. As Federal Reserve Vice Chair for Supervision Michael Barr warned on February 14, the stronger-than-expected inflation report for January serves as a reminder that returning to the 2% inflation target may prove to be a bumpy road.
As the market continues to digest the high threshold for rate cuts, the bet on the first rate cut of the year has rapidly shifted from strong optimism to caution in just two months. CME's FedWatch Tool reveals that rate futures traders currently predict a meager 8.5% probability of a rate cut in March, a significant drop from the 90% probability seen at the end of last year. The timing of the first rate cut has also been pushed back to June, with a probability of at least 25bp cut standing at around 77.17%.
Bracing for the Biggest Day This Week: How Will Nvidia's Earnings and Fed Minutes Make Waves in the Market?
Furthermore, former US Treasury Secretary Lawrence Summers even suggested last Friday that there is still a 15% chance of the Fed raising interest rates in the near future, prompting the market to once again take seriously the possibility of a return to tightening. Kit Juckes at Societe Generale pointed out that if the US economy picks up again, the Fed will ultimately have to tighten policy once more. Citigroup strategists also recommend that investors prepare for more hedging measures to counteract the risk of the Fed quickly shifting from a potentially short-lived period of easy monetary policy to raising interest rates, as happened in the late 1990s. While Lindsay Rosner of Goldman Sachs Asset Management agrees with Summers' assessment of the risk of interest rate increases, she believes that it would be more reasonable for the Fed to maintain the current high interest rates for a longer period of time.
It is worth noting that even though the overnight reverse repurchase agreement (RRP) - an important liquidity tool - has rapidly declined to a lower level, many analysts believe that the Fed will continue to shrink its balance sheet. Wall Street strategists at Barclays and Bank of America, among others, have recently delayed their previous predictions of when the Fed will begin to slow down its quantitative tightening (QT). However, Lorie Logan, President of the Dallas Federal Reserve, suggested in January that as the RRP approaches its low point, the Fed should slow down its balance sheet reduction.
Bracing for the Biggest Day This Week: How Will Nvidia's Earnings and Fed Minutes Make Waves in the Market?
Various indicators suggest that the market's expectations for the next phase of monetary policy easing have been significantly revised from before. However, how the Fed interprets recent data, when to begin cutting interest rates or maintaining current rates for a longer period, and when to slow down QT, all require further clues that may be found in the Fed minutes.
AI Superstar - Nvidia's Earnings Report Released: Will it Ignite Market Enthusiasm or Fall Flat?
$NVIDIA(NVDA.US)$, the leader in the chip and AI wave, is set to release its Q4 2024 financial results after the market closes today. Given the robust demand for AI, Wall Street analysts are optimistic about $NVIDIA(NVDA.US)$'s Q4 performance, particularly its data center business. According to moomoo data, the market currently expects $NVIDIA(NVDA.US)$'s Q4 revenue to reach $20.55 billion, representing a YoY growth of approximately 240%. With higher sales and operational leverage, analysts unanimously anticipate a YoY surge of 641% in $NVIDIA(NVDA.US)$'s Q4 EPS to $4.224.
Against this backdrop of optimism, analysts have rushed to raise their price targets for NVIDIA ahead of the earnings release. Loop Capital has set the most aggressive target price of $1,200, reflecting an upside potential of over 70% from the latest closing price. Other institutions, including Barclays and UBS, have raised their target prices from the previous range of $580-$650 per share to $850. Meanwhile, Goldman Sachs, Bank of America, and Wedbush have set a target price of $800, which still represents an increase of over $100 from the current price.
Bracing for the Biggest Day This Week: How Will Nvidia's Earnings and Fed Minutes Make Waves in the Market?
It is worth noting that excessively optimistic expectations are not necessarily a good thing, as a surge in stock price and an overvaluation may imply the risk of "selling the fact" after the earnings. $NVIDIA(NVDA.US)$ has already risen by over 40% year-to-date, following a massive 239% surge last year. Furthermore, $NVIDIA(NVDA.US)$ has replaced Tesla to become the most heavily traded stock on Wall Street. LSEG data shows that $NVIDIA(NVDA.US)$'s average daily trading volume over the past 30 trading days is around $30 billion. Trading trader Dennis Dick warns that such high trading volumes suggest that retail investors and algorithmic traders are driving up the stock price based on AI hype rather than fundamentals. While the booming AI industry provides strong support for the company's fundamentals, it is important to recognize that the ever-increasing valuation also means that the threshold for NVIDIA's performance to satisfy investors and continue pushing up the stock price is getting higher.
Yesterday's decline in NVIDIA's stock price also reflects these concerns. It opened lower on Tuesday, with the intraday decline widening to 6.7% before ultimately closing down 4.35%. While some have attributed this decline to $Microsoft(MSFT.US)$'s development of a new custom network card to replace NVIDIA's ConnectX-7 to reduce its reliance on NVIDIA, this explanation seems weak given that Microsoft also fell 0.31% on Tuesday. Some analysts suggest that the more likely reason still revolves around valuation, as investors remain uncertain whether NVIDIA's quarterly results can justify its high valuation and choose to lock in profits before the earnings release. ORATS data shows that the options market is currently pricing in an 11% up or down move for NVIDIA after the earnings.
Bracing for the Biggest Day This Week: How Will Nvidia's Earnings and Fed Minutes Make Waves in the Market?
Famous investor Cathie Wood, who has been bullish on NVIDIA, has also been reducing her holdings in the stock for some time. While she believes that the AI wave is not a bubble and acknowledges NVIDIA's leadership position in the AI field and its important role in shaping the computing infrastructure, she also worries that the stock may have risen too far. With the development of self-developed AI chips by Meta, Amazon, Alphabet, NVIDIA will face more competition, and its leadership position may be challenged, and the demand for NVIDIA chips may not be as hot as the market expects. Goldman Sachs' projections for Nvidia in various scenarios for 2025 show that, based on different Bear/Bull analyses, the YoY growth in data center business will range from negative 54% to positive 40%, corresponding to a target price of $267 to $1448 in 2025. Such a huge difference in target prices highlights the obvious uncertainty in NVIDIA's business operations under a complex competitive landscape and rapid technological iteration.
According to Morgan Stanley analysts, the key to NVIDIA's earnings report will be the next generation of GPU chips, the B100, and the earnings guidance. In addition, investors are eagerly anticipating how Jensen Huang views NVIDIA's demand development for the rest of this year. If NVIDIA's Q4 financial report continues to show strong profitability and drives down the forward P/E ratio, it may continue to inject confidence into AI faith and further boost the US stock market. Conversely, if NVIDIA's revenue growth fails to meet investors' high expectations, it may disrupt the upward momentum of the US stock market.
Source: Bloomberg, Reuters, Morgan Stanley, LSEG, MacroMicro
By Moomoo News Irene
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
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