Has the Nvidia (NVDA) and SMCI Bubble Burst?
Summary
TLDRNvidia's recent earnings report exceeded expectations, with a revenue of $30 billion, up 15% quarter-over-quarter and 122% year-over-year, and earnings per share at 68 cents, 4 cents above estimates. Despite this, the stock price dropped 7% after hours, prompting discussions on whether Nvidia's growth potential is waning. The video also addresses Super Micro Computer's (SMCI) plummeting stock price due to accounting irregularities, cautioning against investing in companies with a history of financial fraud.
Takeaways
- 📈 Nvidia reported better-than-expected earnings with revenue at $30 billion, exceeding expectations by $1.3 billion.
- 🔼 They beat earnings per share estimates, reporting 68 cents compared to the expected 64 cents.
- 💹 Nvidia raised their forward guidance for Q3 2025 to $32.5 billion in revenue, an increase of $8 billion from previous estimates.
- 📊 Year-on-year revenue increased by 122%, and earnings per share (both GAAP and non-GAAP) saw significant growth of 168% and 152% respectively.
- 📉 Despite the positive earnings report, Nvidia's stock price dropped over 7% in after-hours trading, raising questions about the stock's valuation.
- 💡 The speaker's intrinsic value calculation for Nvidia is $122, with a conservative valuation at $94, indicating a potential buying range.
- 🚫 The speaker advises against adding more Nvidia shares unless the price drops significantly, highlighting a preference for a margin of safety.
- 📉 The speaker sold cash-secured put options at a $97 strike price, aiming to average down their cost basis if assigned shares.
- 🚨 Super Micro Computer (SMCI) faced a sharp decline in stock price due to accusations of accounting irregularities, leading to a drop of over 20%.
- ❌ The speaker warns against investing in companies with a history of financial fraud, citing examples like Worldcom and Enron, which ended in bankruptcy.
Q & A
What was the outcome of Nvidia's recent earnings report?
-Nvidia reported better-than-expected earnings, beating on both revenue and earnings per share. Their revenue was $30 billion, which was $1.3 billion above expectations, and their earnings per share were 68 cents, 4 cents above expectations.
How did Nvidia's stock price react to the earnings report?
-Despite the positive earnings report, Nvidia's stock price dropped over 7% after hours.
What is the intrinsic value of Nvidia according to the speaker's valuation?
-The speaker's intrinsic value for Nvidia is $122, which is based on certain growth projections and assumptions.
What is the speaker's conservative valuation for Nvidia?
-The speaker's conservative or pessimistic valuation for Nvidia is $94.
What are the buy points for Nvidia that the speaker has identified?
-The speaker has identified buy points at $105, $95, $75, and $71 for Nvidia, based on technical analysis and support levels.
Why did the speaker sell cash-secured put options on Nvidia?
-The speaker sold cash-secured put options at a $97 strike price to collect a premium, which would lower his average purchase price for more Nvidia shares if assigned.
What is the comparison the speaker makes between Nvidia and Cisco during the dotcom boom?
-The speaker compares Nvidia to Cisco during the dotcom boom, noting that while Cisco's revenue increased 15-fold and its stock price increased 42-fold during the six-year boom, Nvidia's revenue has only increased fivefold in the 1.7 years since the AI Revolution began, suggesting there may be more growth potential for Nvidia.
What is the speaker's stance on buying stocks of companies accused of financial fraud?
-The speaker advises against buying stocks of companies accused of financial fraud, citing examples of Worldcom and Enron, which went to zero after such accusations.
What happened to Super Micro Computer (SMCI) that caused its stock price to drop significantly?
-Super Micro Computer (SMCI) was accused of accounting irregularities by Hindenburg Research, which led to a significant drop in its stock price.
Why did the speaker decide not to invest in Super Micro Computer (SMCI) despite its previous recommendation?
-The speaker decided not to invest in SMCI after further research revealed concerns such as inconsistent negative free cash flow, high customer concentration risk, and the use of commodity components in their products, which did not meet his investment criteria.
Outlines
📈 Nvidia's Earnings Report and Stock Price Movement
Nvidia recently reported earnings that exceeded expectations, with a revenue of $30 billion, surpassing predictions by $1.3 billion. Earnings per share were 68 cents, 4 cents higher than anticipated. Despite these positive results, Nvidia's stock price dropped by over 7% after the report, leading to speculation about a potential bubble burst. The video discusses whether this is a buying opportunity or a sign of more significant downturns. The speaker also compares Nvidia's growth to Cisco's during the dotcom era, suggesting that Nvidia's current growth trajectory is sustainable and not indicative of a bubble.
💹 Analyzing Nvidia's Stock Performance and Future Prospects
The speaker shares their personal valuation of Nvidia at $122, considering it a fair intrinsic value. They discuss their optimistic and pessimistic growth projections, setting a valuation range from $94 to $122. The speaker outlines their strategy for buying more Nvidia shares, identifying specific support levels where they would consider purchasing additional stocks. They also mention selling cash-secured put options as a strategy to potentially lower their average purchase price. The video addresses concerns about Nvidia's rapid growth and compares it to Cisco's during the dotcom bubble, suggesting that Nvidia may still have room to grow without being overvalued.
📉 Super Micro Computer's Accounting Irregularities and Stock Crash
The video shifts focus to Super Micro Computer (SMCI), which has been accused of accounting irregularities leading to a significant drop in its stock price. The speaker had previously identified concerns with SMCI, including inconsistent free cash flow and high customer concentration risk, which led them to avoid investing in the company. The recent accusations by Hindenburg Research have further validated the speaker's decision to stay away from SMCI. They advise against investing in companies with a history of financial fraud, drawing parallels to past cases like Worldcom and Enron.
⚠️ The Dangers of Investing in Companies with Fraud Accusations
The speaker emphasizes the risks associated with investing in companies accused of financial fraud, using historical examples of Worldcom and Enron to illustrate the potential for complete loss of investment. They recount their own experience with Super Micro Computer, detailing how they had previously identified red flags and decided against investing. The recent allegations against SMCI reinforce the speaker's investment philosophy of avoiding companies with a history of dishonest financial practices. The speaker advises viewers to be cautious and to prioritize trustworthiness in their investment decisions.
🚀 Final Thoughts on Investing in Nvidia and SMCI
In conclusion, the speaker reiterates their stance on Nvidia, suggesting that despite the recent stock price drop, it remains a strong investment due to its growth potential and alignment with their valuation models. Conversely, they advise against investing in Super Micro Computer due to the recent fraud accusations and the company's history of financial irregularities. The speaker encourages viewers to learn from their investment strategies and to seek out opportunities that offer both growth potential and financial integrity.
Mindmap
Keywords
💡Earnings Report
💡Stock Price
💡Buyback
💡Forward Guidance
💡Intrinsic Value
💡Valuation Range
💡Technical Analysis
💡Margin of Safety
💡Accounting Irregularities
💡Economic Moat
💡Financial Fraud
Highlights
Nvidia reported earnings that were much better than expected.
Nvidia beat on revenue and earnings per share.
Nvidia announced a share buyback of 50 billion shares.
Despite positive earnings, Nvidia's stock price dropped over 7% after hours.
Nvidia's revenue for the quarter was $30 billion, 1.3 billion above expectations.
Earnings per share were 68 cents, 4 cents above expectations.
Nvidia raised their forward guidance to $32.5 billion in revenue.
Year-on-year revenue increase for Nvidia was 122%.
GAAP diluted share earnings were up 168% from a year ago.
Non-GAAP earnings were up 152% from a year ago.
The intrinsic value of Nvidia is estimated at $122.
A conservative valuation for Nvidia is $94.
The speaker would consider buying more Nvidia shares if the price drops to $95.
Super Micro Computer (SMCI) is accused of accounting irregularities.
SMCI's share price dropped over 20% due to the accounting irregularities.
The intrinsic value of SMCI was previously calculated at $100, but the speaker now avoids the stock.
SMCI has a history of financial fraud accusations and SEC charges.
The speaker advises to avoid companies accused of financial fraud and to sell if already invested.
Transcripts
So Yesterday Nvidia reported earnings
that were much better than expected they
beat on Revenue they beat on earnings
they were buying back 50 billion shares
that reported raising their forward
guidance but despite that the stock
price dropped over 7% after hours so
does that mean that the Nvidia bubble
has finally burst and we'll also take a
look at Super Micro computer smci that
just got accused of accounting uh
irregularities that caused a share price
to create over 20% yesterday let's find
out more in this video whether these are
buys holes or
[Music]
selles so yesterday almost everyone in
the market was waiting for nvidia's
earnings because Nvidia is one of the
most valuable companies on the planet
today and their earnings didn't
disappoint they in fact reported better
than expected earnings uh here's a quick
summary so their revenue came in at $30
billion which was 1.3 billion above
expectations their earnings per share
came in at 68 cents which was a bit of 4
cents and they raised their quarter Tre
2025 guidance to
32.5 billion in Revenue which was um an
increase of8 billion uh in terms of year
on-year increase which to me is the most
important thing their revenue came in
for the quarter at 30 billion which is
up 15% from quarter 1 but more
importantly year on year
Revenue excuse me is up
122% and the let's see the earnings
which are Gap diluted share earnings was
up 168% from a year ago and non- GAP
earnings was up 152% from a year ago so
as an investor when I take a look at
this I asked myself this question when I
first valued this stock it's based on
certain growth projections so when these
earnings report come in is it in line
with the growth assumptions I made in my
valuation in in the case of Nvidia so
far pretty pretty good it is in line in
fact it's slightly above uh what I
projected in my valuations so in case
you don't know I think I mentioned it
before my latest valuation for NVIDIA
there's no change for the valuation and
my valuation is at uh let just take a
look uh
$122 so that is my intrinsic value of
Nvidia now because Nvidia there is again
a bit of uncertainty of their future
growth so I like to have what I call an
optimistic growth projection or rather
base case and a more pessimistic like if
everything goes wrong and they don't
grow as much as people think then what
are the shares worth okay so for my
pessimistic valuation it is
$94 so that is my conservative valuation
that is my base case valuation so this
is what I call my valuation range
so once I know my valuation range it
becomes very simple right as long as the
stock price goes below the intrinsic
value and I've got a margin of safety I
would happily add more shares okay now
but given I already have kind of like a
full position in Nvidia Nvidia is
already about the fifth largest position
in my portfolio so I would not add more
unless it gets much much cheaper okay so
what I do for all my subscri rers in the
ultimate investors Playbook is that I
will update the intrinsic value of every
stock every month but of course you can
do it yourself you can always uh
download my intrinsic value calculator
as part of the whale investor cost learn
how to Value the stock really simple
takes 10 minutes to to do it and you can
do your own valuation okay so you can
see for every stock I've got my
valuation
range and I also identify at least three
to four buy points where I would add
shares and these buy points are based on
technical analysis based on support
levels so you can see that for
NVIDIA my support levels where I would
add shares as an investor would be 105
that is my first buy level right which
gives me a margin of safety below the
intrinsic value 105 the next support
level to add would be
$95 these are the black lines Next Level
to add will be 75 and finally $71
so given that I already have quite a bit
of Nvidia shares I won't add more even
if it drops to 105 because to me at 105
is it's okay it's below valuation but
it's not super compelling right so I'll
only add more personally if it gets uh
to nearer $95 so what I did a few days
ago which I sent the notification to my
subscribers was I sold cash secure put
options at 97 strike price and I
collected a premium of about about close
to $2 premium right so which means if
Nvidia stays below $97 in 30 days I'll
be assigned Nvidia shares at $97 strike
price minus the premium I collected my
average purchase price for more Nvidia
be $95 which I think is a damn good deal
okay but I think for now I don't think
Nvidia will drop below 97 it looks like
uh it dropped 7% aftermarket hours and
today if you take a look at the
pre-market you can see Nvidia is trading
at a pre-market of 121 right now so
unlikely that right now it's going to
drop below 97 and unlikely I can add any
shares
yeah okay but having said that if I was
an investor with no Nvidia shares and I
wanted to start buying would I buy at
this price no I would right because it's
right now at a fair value it's at a fair
price but as an investor we want to only
buy when it's below the valuation so we
get a margin of safety so again as a new
investor to edit for the first time I
want want I want to get it at least at
105 so does it mean that it's going to
go to 105 of course not we can't predict
the future if it doesn't so be it buy
something else there a lot of efficien
see if it goes to 105 great opportunity
to add more Nvidia now you know the
funny thing is that you know some people
would would be asking they say but you
know Nvidia has gone up so much uh in
the last two years or so and is it the
end of the run for for NVIDIA is it you
know is is it at top of the bubble and
they like to compare it with
Cisco those of you who are old enough
will remember that during the dot Boom
the dot boom started in late 94 1994 to
2000 so that was a time where people
went crazy all the internet is going to
change the world and everything a dotom
people bought and share price went up
even for companies that were not making
money right now at a time Cisco was the
most important
company uh for the internet uh
Revolution right because Cisco was
involved in building the backbone the
infrastructure of the internet very
similar to Nvidia which is now building
the infrastructure and backbone of the
AI Revolution so it's a pretty good
comparison right so true enough Cisco um
you know their revenue was growing their
share price was growing and eventually
of course the bubble burst because it
got ahead of itself and then it
collapsed and slowly it's it's coming
back up taking a long time to go back up
so people are saying hey is NVIDIA also
at the end and this is a very quick
question to answer that question let's
put them side by side and let's see if
we can find any
similarities so first let's look take a
look at a dotcom bubble or doom boom
which turned into a bubble so the dotcom
boom started in late 1994 and it peaked
in the year 2000 where the bubble burst
so it was a six-year Run for the do boom
so during during this six years Cisco
which again was the most important
company the AI sorry in the internet
Revolution uh their revenue during that
six years their revenue increased 1,
1400% which is 15
fold and at that time their share price
increased
4,100 which is
42 times okay so where is NVIDIA now
based on this comparison so the current
AI Revolution started with the launch of
cck GPT which was late 2022 in fact
November 2022 so from then to now which
is August 2024 it's about 1.7 years so
if you compare that 1.7 years to 6 years
you know there's still a couple of years
to go if you want to do that comparison
okay now so far in this 1.7 years what
has happened to nvidia's revenue
nvidia's revenue has increased
400% or fivefold which again is nowhere
near Cisco's Revenue that increased 15
fold so in other words Nvidia could
still have a long Runway to go in this
AI Revolution all right at the same time
from the start off that that AI
Revolution check GPT launching Nvidia
stock price has increased
830 on 9.34 which some people would
think W it's already gone up nine times
how much higher can it go hey Cisco went
up freaking 42 times 42 times we could
be just at the beginning okay so because
of that no I ain't selling I'm not
selling my Nvidia shares I'm holding it
for the 42x yeah okay will he get it I
don't know he will get there I think so
right maybe more maybe less but you know
somewhere around there now having said
that you may say but Adam if you are so
confident it's going to go up so much
more why you just going and buy more now
why because remember nothing goes up in
a straight line the stock price will not
go up every day every week every month
every year for for the next four years
right there will be big ups and downs be
like a roller coaster so I don't want to
jump in while it's you know still near a
high I want to get in after a wave down
like Buffett always says you got to be
greedy when everyone is panicking
everyone is fearful people think we're
going to die that's when you get a damn
good price that's when you buy at a
share price way below the intrinsic
value get a marginal safety okay by the
way if you take a look at Cisco Cisco
went up 4,000% the share price but
during that sixe run Cisco's stock price
had multiple declines or Draw Downs of
between 20 to 30% during its ascent so
similarly I can tell you that although I
think Nvidia can still grow tremendously
in the next 4 years there will be
crashes we wouldn't call it crashes
there there will be pullbacks or Draw
Downs of 20 to 30% there will be I can
guarantee you that in fact who knows
right now we could drop another 20%
right we could I don't know right so
there will be opportunities to add more
in the future so uh that's why I would
say don't chase the girl when a girl
runs away don't chase the girl wait for
the girl to run into your arms when
she's fearful because she'll always get
fearful once in a while or guy whatever
is your your gender preference right let
me talk about super micro computer smci
holy all right the the stock price
is down like uh what 64% from the high
from 1229 it's down 443 and pre-market
it looks like it's going down more to
427 430 so of course I've got questions
from people is this a buy is this an
opportunity to buy a stock when it's
down so much when it looks like it's
really undervalued and people are
panicking first let me set the record
straight okay if you guys recall 6
months ago I made a video about smci
because it was one of the hottest stocks
and I said at a time that my intrinsic
value calculation was
$1,006 okay and I said if it goes below
that to these buy levels hey could be
something to buy all right I said that
and
then uh after smci crashed especially
the last few days people say hey you
said this cheap what's going on Adam
obviously these people didn't read my
followup post okay because after I
created this video I did more research
into the company and I said oh I
don't think I'm going to buy it anymore
all right I found some things that were
really
concerning and I actually posted this on
all my social media including YouTu
YouTube and this was 6 months ago and uh
it was there right and uh I said that
yep Al although smci looks like a very
profitable business with revenues
growing and blah blah blah however I had
a few concerns that do not meet my
investment criteria as you guys know I
only invest in the top 1% of companies
in the world that are very very very
safe that are very predictable that are
very consistent and once I find there
could be something wrong no thank you I
I don't buy that right that's the reason
I don't buy snowflake or or or pelatin
or or Tesla because you know all these
companies that's there always something
wrong which no thanks I'm going to avoid
them right so for smci what did I find
wrong uh number one the company has
inconsistent negative free cash flow in
certain years so whenever a company has
got revenue growing profits growing but
free cash flow negative usually there's
something wrong there's a red flag they
could be doctoring their account and
I've seen that before in other companies
like in Singapore one company called uh
high flux and another one that was if
I'm Nobel group same issue right uh so
when I looked at it I say okay I think
something's wrong I'm I'm going to avoid
that yeah next high customer
concentration risk a significant
percentage of Revenue comes from a few
customers that was another concern they
don't have a very strong economic mode
right so basically smci their products
they look like eeka shelves okay right
and while their mode is stronger than
Dell and h HP it is not strong enough uh
a mode and economic mode for me to be
comfortable in um at the same time their
core components used in their servers
are commodity components that can easily
be replicated by other players right so
because of that I I said to my
subscribers I shared on my social media
I said I won't buy this stock all right
so to set the record straight I I
already said so don't buy it yeah now
but to be and and after that what
happened was obviously the stock started
going down
okay but then what happened was two days
ago Hindenburg which is a research firm
that specializes in finding companies
that engage in fraud and they shot these
companies they said that they found that
smci uh they accused smci of um
doctoring their accounts now now this
was something that is very hard to
predict okay now I didn't predict it
myself I didn't predict it myself right
so and the whole thing came down there's
no way to predict it but it happens okay
so the stock created in the in the last
two days so the question is uh is this
an opportunity to buy and from my
experience I will never touch these kind
of stocks here's the thing I love great
companies when they're hit by bad news
all kinds of bad news like they miss
their earnings they miss their revenue
China we I'll buy it because these are
solvable problems these are short-term
issues but the moment a company's
accused of financial irregularities once
they accused of do doctoring their books
I will never touch this company why few
reasons number one You Don't Know How
Deep The Rabbit Hole goes when there's
smoke there's fire and whatever
valuation I did where I calculated the
intrinsic value which was ,000 is based
on data that I thought I could trust
based on revenues and and earnings right
but now if you tell me that all these
are doctored they are misrepresented
then what's the intrinsic value it could
be anything right the value of the stock
could be a th000 it could be 500 it
could be freaking zero all right so you
know no thank you I'm not going to buy
this kind of stock it's kind of like in
a marriage for example if your husband
or or wife makes a mistake you know for
example the
uh you know they lose their job their
business goes bus you stick with them
through thick and thin all right because
they can solve the problems but the
moment you catch your husband coming
home with lipstick on the shirt or a
condom drops off of his pocket the
marriage is over right you know that you
can't trust this guy anymore okay and
the worst thing is that if you caught
him cheating before and it's not the
first time and in fact this is what is
happening to super micr computers so it
is not the first time they're being
accused of fraud they were accused
before they admitted it yeah we we did
it they paid a fine and they're doing it
again or looks like they're doing it
again right so that is really scary so
this is from the report of Hindenburg
and they found glaring accounting red
flags evidence of undisclosed related
party transactions sanctions that they
went against export control failures and
customer issues in 2018 by the way I did
read read this before I forgot that I
read it and now it became clear in 2018
super micro was temporarily delisted
from NASDAQ for failing to file their
financial statements and by August 2020
the company was charged by the SEC for
widespread accounting violations so they
did this before they were caught
cheating before it's not the first time
and it was related to $200 million in
improperly recognized revenue and
understated expenses resulting in AR
officially elevated sales earnings and
profit
margins here's a scary thing Less Than 3
months after paying 17.5 million fine
for their
wrongdoing they fired those Executives
who were dishonors but 3 months later
they rehired these top Executives that
were directly involved in the accounting
Scandal it's like okay let's do it again
right right it's like again
you know you caught your husband
cheating he broke up with with his that
girlfriend he was affair with and then
he meets That Girl Again okay and a
former salesperson told us that almost
all of them are back almost all the
people that were let go that were the
cause of the of this
m how the hell do you pronounce this m
sense oh that's beyond my english
comprehension they are back okay so yeah
because of that you know what I'm not
going to touch this stock if I was in
this stock I would just get out I would
just get out now again is it possible
that after I sell the price rebounds
back up of course it's possible right I
can predict the short-term movement all
right but I'm not willing to take the
risk because I've seen this movie before
companies that are accused of financial
fraud if it is really really bad the
company can go to zero right so if I own
the shares I rather lose 30% of my money
or 40% than freaking 100% and for those
of you who are not old enough to
remember these two companies really
taught me this lesson to avoid companies
once they accused of financial fraud the
first is
Worldcom Worldcom was the second largest
Telephone Company in the us at the time
and Worldcom was in the Dow Jones
Industrials average was one of the
biggest companies in the world and in
the S&P 500 and it was selling at $55
per share and once they were once they
started to be accused of financial fraud
their CEO resigned and the the stock
basically went to zero another one is
Enron again Enron was one of the biggest
companies in the world so these are not
small companies these were huge Dow
Jones Industrial S&P 500 and Enron was
named America's most Innovative company
for six consecutive years it was one of
the biggest energy commodity companies
in the world and from a share price of
90 sorry $86 again once they found that
the revenue and profits were fraudulent
they were all faked right stock went to
freaking zero so all I can say is and
this is something I teach in my
investing course that once a company's
accus of financial fraud get out just
get the F out all right so that's it for
this video hope you learned something
may the markets be with you and I'll see
you guys in the next video if you want
to catch my latest videos click on the
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video if you want to check out my online
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financial markets and create an income
from all around the world if you want to
join my live wealth Academy program go
on to wealth Academy global.com and find
out more about how you can learn
investing and trading live online this
is Adam coup and may the markets be with
you
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