Market views Nvidia's incremental raises as 'less impressive', says Deepwater's Gene Munster

Summary

In a CNBC discussion, it's noted that despite NVIDIA's impressive earnings and guidance, its stock fell, dragging down other semiconductor stocks. Gene Munster explains that the market expected 'great' rather than 'good', and while NVIDIA's incremental raises are less impressive, the real story is the company's shift from October to January guidance, which, when adjusted, shows a significant 12% increase. Munster remains optimistic about NVIDIA's future, predicting a 'blowout' in the January quarter and asserting that AI will be more transformative than the internet, as it commoditizes intelligence at a scale and speed beyond human capability.

Takeaways

• 📉 NVIDIA's stock fell despite reporting good numbers and guidance, suggesting the market expected great results, not just good ones.
• 🔍 Gene Munster from 'Fast Money' believes the market is viewing NVIDIA's performance as a pause, wanting more impressive growth.
• 📈 The guidance for NVIDIA's October quarter was raised by 2.5%, which was less impressive compared to the 5.2% increase previously guided for the July quarter.
• 🎯 Munster points out that if the guidance is adjusted for the shift from October to January, NVIDIA actually raised its guidance by 12%, indicating an acceleration.
• 🚀 Munster is optimistic about NVIDIA's future, expecting a 'blowout' in the January quarter when their AI technology ramps up.
• 💡 He argues that to achieve general and super intelligence, the scaling laws in tech will require more hardware and data, which will benefit NVIDIA.
• 🌐 Munster believes AI will be more transformative than the internet, as it commoditizes intelligence at a scale and speed beyond human capability.
• 🤖 The discussion suggests that NVIDIA and AI are seen as bellwethers for the market, with the potential to influence broader market trends.
• 📊 The correlation between NVIDIA's performance and the market's performance is noted to be getting smaller, indicating a possible shift in market dynamics.
• 🔮 Munster predicts a future where every company integrates AI into its operations, similar to how mobile and the internet have become ubiquitous.

Q & A

Why did NVIDIA's stock fall despite reporting huge numbers?

NVIDIA's stock fell because the market expected more than just good results; it wanted great results. The market perceived a deceleration in the company's growth, with incremental raises in guidance becoming less impressive.

What did Gene Munster suggest about the shift in NVIDIA's Blackwell project?

Gene Munster noted that NVIDIA's Blackwell project shifted from the October to the January quarter. This shift was not fully accounted for by analysts, which meant that the true impact of NVIDIA's raised guidance was underappreciated.

What does Gene Munster believe about the future of NVIDIA in relation to AI?

Gene Munster believes that NVIDIA still has two great years ahead, driven by the scaling laws of technology that require increased compute power to achieve general and super intelligence. He is optimistic about NVIDIA's future in the AI space.

Why does Gene Munster think AI could be more transformative than the internet?

Gene Munster argues that AI could be more transformative than the internet because AI represents intelligence at scale and speed that humans cannot match. While the internet was built on human intelligence, AI takes this to a new level, effectively commoditizing intelligence.

What concerns were raised about NVIDIA's recent stock performance?

Concerns were raised about the possibility that traders may be losing confidence in NVIDIA as a tradeable stock, especially given its lack of significant gains in recent months despite strong numbers.

How does Gene Munster view the current state of the AI trade?

Gene Munster views the AI trade as still being in its early stages. He believes that the market is in a three to five-year bull market driven by AI, which will be very transformative.

What does Gene Munster predict about NVIDIA's January quarter performance?

Gene Munster predicts that NVIDIA's January quarter will be a blowout, with significant revenue from the Blackwell project contributing to strong results.

How does Gene Munster see the relationship between AI and the broader market?

Gene Munster believes that if AI continues to grow, it will pull up the rest of the market as well. However, if AI doesn’t pan out as expected, leadership within AI-related companies might still emerge.

Why is there a concern about the deceleration of NVIDIA's growth?

The concern arises because the raises in NVIDIA's guidance are becoming smaller over time, which the market interprets as a slowdown in growth momentum.

What is Gene Munster's long-term outlook on AI's impact on the tech industry?

Gene Munster is very bullish on AI's long-term impact, believing it will be more transformative than the internet and lead to significant advancements in technology, benefiting companies like NVIDIA.

Outlines

00:00

📉 NVIDIA's Stock Decline Despite Positive Earnings

The discussion begins with a focus on NVIDIA's stock performance, which fell despite the company reporting strong earnings. The conversation involves financial analyst Gene Munster, who suggests that while NVIDIA's numbers were good, the market expected greatness rather than just good performance. Munster highlights a deceleration in the company's guidance, pointing out that the incremental raises are becoming less impressive. He also notes that the market may not have fully adjusted for the shift of expected revenue from the October to the January quarter due to the rumored Blackwell product launch. Munster believes that NVIDIA's stock will see a significant boost in the January quarter and maintains a positive outlook on the company's future, attributing its potential to the scaling laws of technology and the pursuit of general and super intelligence.

05:03

🚀 A.I.'s Transformative Impact and Market Outlook

The second paragraph continues the conversation on NVIDIA and the broader impact of artificial intelligence (A.I.) on the market. Gene Munster expresses his optimism about A.I.'s transformative potential, even suggesting it could surpass the internet in its impact. He argues that A.I. operates at a scale and speed beyond human intelligence, which could lead to significant value creation. The discussion also touches on the correlation between NVIDIA's performance and the overall market, questioning whether the market can continue to rise if the A.I. trade does not materialize as expected. Munster believes that A.I. will become a fundamental part of every company's operations, similar to mobile and internet technologies, and this integration will likely lead to higher margins and market growth.

Keywords

💡NVIDIA

NVIDIA is a leading technology company known for its graphics processing units (GPUs) and artificial intelligence (AI) technologies. In the video, the discussion revolves around NVIDIA's stock performance and its role in the AI market. The company's financial results and future guidance are analyzed to understand why its stock did not respond positively despite good numbers, indicating the market's high expectations.

💡AI

Artificial Intelligence (AI) refers to the simulation of human intelligence in machines that are programmed to think like humans and mimic their actions. The video discusses AI's potential to be more transformative than the internet, suggesting that AI could revolutionize various industries by automating complex tasks and decision-making processes.

💡Stock Performance

Stock performance refers to the change in the market value of a company's stock over time. In the context of the video, NVIDIA's stock performance is a central theme, with the discussion focusing on why the stock fell despite the company reporting good financial numbers, highlighting the market's reaction to NVIDIA's financial guidance and future prospects.

💡Guidance

Financial guidance is a company's projection of its future financial performance, including revenue and earnings. The video script mentions that NVIDIA's guidance was 'good' but not 'great,' suggesting that the market had higher expectations. The guidance is a key factor in investors' decisions and can significantly influence a company's stock price.

💡Semiconductor Stocks

Semiconductor stocks are shares of companies that design, manufacture, or sell semiconductors, which are essential components in electronic devices. The video mentions that NVIDIA's stock fall affected other semiconductor stocks, indicating the interconnectivity within the industry and how the performance of one major player can impact the entire sector.

💡Market Expectations

Market expectations refer to the collective beliefs of investors about a company's future performance. In the video, it is suggested that the market wanted 'great' results from NVIDIA, not just 'good,' indicating that the company's actual results did not meet the high expectations set by investors, leading to a negative stock response.

💡Deep Learning

Deep learning is a subset of machine learning in AI that uses neural networks with many layers to model and understand complex patterns. The video implies that NVIDIA's future is tied to advancements in deep learning and AI, as these technologies require significant computational power, which NVIDIA provides through its GPUs.

💡General Intelligence

General intelligence, or 'strong AI,' refers to a machine's ability to understand or learn any intellectual task that a human being can do. The video suggests that the progression towards general intelligence is a long-term driver for NVIDIA's growth, as the company's products are essential for the computational power needed to achieve such advanced AI capabilities.

💡Super Intelligence

Super intelligence refers to an intellect that is much smarter than the best human brains in practically every field, including scientific creativity, general wisdom, and social skills. The video script mentions the concept in the context of NVIDIA's future prospects, suggesting that the company's technology will play a crucial role in the development of super intelligent systems.

💡Scaling Laws

Scaling laws in technology refer to the principles that govern how certain variables, such as performance or efficiency, scale with increases in size or capacity. In the video, Gene Munster mentions that to achieve general and super intelligence, the scaling laws in tech will hold, implying that more hardware and data will be required, which bodes well for NVIDIA as a provider of such hardware.

💡Bull Market

A bull market is a period of time when the stock market is experiencing steady price increases, typically due to optimism about the economy and corporate earnings. The video suggests that a bull market powered by AI is on the horizon, indicating that AI-related stocks, including NVIDIA, could see significant growth in the coming years.

Highlights

NVIDIA's stock fell despite reporting strong numbers, indicating the market expected more than just good results.

Gene Munster believes the market wanted great results, not just good ones, from NVIDIA's financial report.

NVIDIA's guidance was 2.5% higher than street expectations, showing a deceleration from the previous quarter's 5.2% increase.

The shift of NVIDIA's focus from the October to the January quarter was not fully accounted for by analysts, which could have affected stock performance.

On an apples-to-apples basis, NVIDIA raised guidance by 12% when considering the revenue shift to the January quarter.

Gene Munster predicts a blowout performance for NVIDIA in the January quarter, suggesting the market may be underestimating its potential.

NVIDIA's recent performance has raised questions about investor and trader confidence in the stock as a tradeable asset.

Despite recent stock performance, Gene Munster remains optimistic about NVIDIA's future, citing the company's role in advancing artificial intelligence.

Munster argues that AI has the potential to be more transformative than the internet, as it commoditizes intelligence at a scale and speed beyond human capability.

The discussion suggests that AI's impact on the market could be broader than NVIDIA alone, with potential for other companies to benefit.

The conversation highlights the importance of scaling laws in technology, which could benefit NVIDIA as AI and superintelligence advance.

Munster's belief in AI's transformative power is so strong that he stakes his career on it, indicating a long-term bullish outlook.

The potential for AI to become a foundational aspect of all companies, similar to mobile and the internet, is discussed as a key market driver.

The conversation concludes with a debate on whether the AI trade is a temporary trend or a long-term market influence.

Munster anticipates that if the AI trade doesn't materialize, there will be a shift in market leadership within the AI sector.

Transcripts

WANT TO STAY AHEAD.

BRIAN?

>> BIG NUMBERS THERE.

KATE ROONEY, THANK YOU VERY

MUCH.

ALL RIGHT, SO, LET'S DIG DEEPER

INTO THE NVIDIA STORY AND A.I.

IN GENERAL.

NOW, NVIDIA, AS YOU HEARD, FELL

TODAY, AND IT TOOK DOWN OTHER

SEMICONDUCTOR STOCKS WITH IT.

NVIDIA'S NUMBERS WERE HUGE, SO,

WHY DIDN'T THE STOCK RESPOND IN

A POSITIVE WAY?

LET'S BRING IN GENE MUNSTER,

"FAST MONEY" FRIEND.

IT'S A GOOD QUESTION.

THE NUMBERS WERE GOOD, THE

GUIDANCE WERE GOOD, BUT

APPARENTLY, THE MARKET WANTED

GREAT, NOT JUST GOOD.

>> BRIAN, I'M A BIG BELIEVER,

WHEN YOU START EXPLAINING YOUR

LOSING AND I RUN THE RISK OF

EXPLAINING HERE TODAY, SO, MY

PERSPECTIVE WAS, I THINK THE

MARKET IS VIEWING THIS EXACTLY

LIKE GUY LAID OUT.

IS THAT THE INCREMENTAL RAISES

ARE GETTING LESS IMPRESSIVE.

IN FACT, IF YOU LOOK AT THE

GUIDANCE, IT WAS UP 2.5% FROM

WHERE THE STREET WAS EXPECTING

FOR OCTOBER.

THEY GUIDED UP 5.2%, BACK WHEN

THEY GUIDED THE JULY QUARTER,

SO, YOU SEE THAT DECELERATION.

BUT I THINK THERE'S AN IMPORTANT

PIECE THAT CAN BE MISSED HERE,

WHICH IS -- IT WAS VERY CLEAR

THAT BLACKWELL SHIFTED FROM THE

OCTOBER TO THE JANUARY QUARTER.

AND VERY FEW ANALYSTS MADE ANY

ADJUSTMENTS TO THEIR NUMBERS AS

THAT WAS BEING RUMORED.

SO, IF YOU LOOK AT THE GUIDANCE

ON AN APPLES TO APPLES BASIS,

AND BRING IN THE SEVERAL BILLION

IN REVENUE THAT JENSEN OUTLINED

FOR THE FIRST QUARTER, WHEN

BLACKWELL RAMPS, IT'S NOW IN THE

JANUARY QUARTER, BUT BRING THAT

BACK TO THE OCTOBER QUARTER,

THEY RAISED GUIDANCE BY 12%.

AND THAT WOULD HAVE BEEN AN

ACCELERATION.

SO, AGAIN, I'M EXPLAINING.

I THINK THE MARKET IS JUST

VIEWING THIS AS TAKING A

BREATHER, WANTING MORE.

BUT THEY'RE GOING TO GET MORE

WHEN IT COMES TO THAT JANUARY

QUARTER.

I EXPECT THAT'S GOING TO BE A

BLOWOUT.

>> GENE, YOU GAVE GUY A NICE

COMPLIMENT, WHICH IS NICE.

AND YOU HEARD WHAT HE SAID,

WHICH IS, IS THIS THE START OF

SOMETHING IN A BAD WAY, AND

STOCKS CAN TURN.

FIRST OF, NVIDIA HASN'T REALLY

MADE ANY MONEY IN TWO MONTHS,

BUT STOCKS CAN TURN QUICKLY.

WHEN YOU HAVE THESE KINDS OF

NUMBERS AND THIS KIND OF

FORECAST, AND WE DON'T SEE

POSITIVE PRICE ACTION, DO YOU

THINK THIS COULD BE TO GUY'S

POINT KIND OF THE START OF

INVESTORS NOT LOSING CONFIDENCE

IN NVIDIA, BUT MAYBE TRADERS

LOSING CONFIDENCE IN NVIDIA AS A

TRADEABLE STOCK?

>> I THINK WE STILL HAVE TWO

GREAT YEARS LEFT OF NVIDIA.

DEEPWATER, WE OWN THE STOCK.

THE REASON WHY WE OWN IT IS THAT

WE BELIEVE THAT TO GET TO

GENERAL INTELLIGENCE AND

EVENTUALLY SUPER INTELLIGENCE,

THE SCALING LAWS IN TECH ARE

GOING TO HOLD.

AND THE SCALING LAWS ARE TO

INCREASE COMPUTE, YOU HAVE TO

PUT MORE HARDWARE AND DATA AT

IT.

AND IF THAT'S THE CASE, IF YOU

BELIEVE THAT IN ORDER TO REACH

GENERAL AND SUPER INTELLIGENCE,

THE SCALING LAWS WILL HOLD,

NVIDIA'S GOING TO HAVE AN

OUTSIDE BENEFIT TO THAT.

AND I THINK WE'RE STILL VERY

EARLY IN THIS TRADE.

WE TALKED, SOME OF THE TRADERS

TALKED EARLIER ABOUT THIS A.I.

TRADE GETTING LONG IN THE TOOTH.

AND I THINK IT'S REALLY HEALTHY

FOR AN A.I. TRADE.

I'M IN THE CAMP THAT THREE TO

FIVE-YEAR BULL MARKET THAT'S

GOING TO BE POWERED BY A.I.

SO, WE'RE STILL EARLY IN THAT.

BRIAN, I'M OPTIMISTIC, AND I'M

BASICALLY STAKING MY CAREER THAT

A.I.'S GOING TO BE MORE

TRANSFORMATIVE THAN THE

INTERNET.

AND, I MEAN, THAT BELIEF INFORMS

HOW I THINK ABOUT NVIDIA.

>> OKAY.

COURTNEY HAS A QUESTION, BUT HOW

CAN A.I. BE MORE TRANSFORMATIVE

THAN THE INTERNET, GENE, ALL DUE

RESPECT, WHEN A.I. RUNS OFF THE

INTERNET?

SO, IT'S LIKE -- THE INTERNET IS

THIS, AND A.I. IS LAYERED ON TOP

OF IT, HOW CAN IT BE BIGGER THAN

THE THING IT NEEDS TO EXIST?

>> THE INTERNET WAS BUILT ON

INTELLIGENCE, WAS BUILT ON HUMAN

INTUITION, IT WAS BUILT ON

INTELLIGENCE.

IT WAS -- AND ULTIMATELY, THAT

IS WHAT A.I. IS -- IS SOLVING

FOR, IS -- IT'S INTELLIGENCE AT

SCALE, AND AT A SPEED THAT

HUMANS CAN'T TOUCH.

AND SO, THAT'S WHY, I THINK

INTELLIGENCE CAME BEFORE THE

INTERNET.

AND, YOU KNOW, WHAT IS THE VALUE

OF BASICALLY COMMODITIZING

INTELLIGENCE?

AND I THINK IT'S -- I THINK

THERE'S A HIGH VALUE THERE.

>> NOW, GENE, WE TALK A LOT

ABOUT NVIDIA AND REALLY IT HAS

BEEN KIND OF A BELLWETHER, IF

NVIDIA DOESN'T DO WELL, THE

MARKET ISN'T GOING TO DO WELL,

WHICH CLEARLY DIDN'T HAPPEN.

AFTER SEEING THE CORRELATION GET

SMALLER, I'M CURIOUS WHAT YOUR

THOUGHTS ARE.

LET'S SAY WE'RE WRONG AND THIS

A.I. TRADE ISN'T GOING ANYWHERE,

DOES THAT MEAN IT'S SOMETHING

NEGATIVE FOR THE STOCK MARKET,

OR CAN THEY CONTINUE TO GO

HIGHER, EVEN IF THAT TRADE

DOESN'T PAN OUT?

>> I THINK THE WAY THIS PLAYS

OUT IS, RIGHT NOW, I WOULD SAY,

IT'S A NARROW MARKET THAT'S

DRIVEN -- THE PERFORMANCE HAS

BEEN NARROWED, AND LARGELY

RELATED TO A.I. HARDWARE.

I'M OF THE BELIEF THAT THIS WILL

IMPACT MARGINS.

THIS IS A WELL-TRAVELED BULL

CASE FOR A.I., IS THAT

ULTIMATELY, EVERY COMPANY IS

GOING TO HAVE TO HAVE A.I. AS

PART OF THE FABRIC OF THEIR

COMPANY, JUST LIKE MOBILE AND

THE INTERNET IS.

SO, IF THAT'S THE CASE, I THINK

WE CAN SEE HIGHER MARGINS.

I THINK THE REST OF THE MARKET

WILL GET PULLED UP.

IF I'M WRONG, I THINK WE'RE

GOING TO SEE LEADERSHIP WITHIN

A.I., SOME OF THESE COMPANIES.

WE'RE GOING TO S