Anyone was worried the AI bubble was bursting and video just sent a loud and clear message.
The boom is far from over now.
The world's largest public company, now nearing a staggering $5 trillion market cap, just reported a massive fourth quarter.
Sales skyrocketing by 73% to $68 billion practically doubling its profit, and CEO Jensen Huang saying we have reached an inflection point, declaring that agentic AI is finally generating real world profits.
But Wall Street is demanding absolute perfection, or so it seems.
And beneath the blowout numbers, questions are swirling about customer balance sheets, a shift in chip technology, and ongoing geopolitical tensions with China.
Joining me live here at the New York Stock Exchange to weigh in. head of visible Alpha research at S&P Global Market Intelligence.
Melissa happy Friday.
Thank you so much for joining me.
Happy Friday.
Thanks for having me here you and I were just remarking about the many headlines that are scrolling about and how much is right around the corner.
But of course, first and foremost with video earnings, what are your key takeaways here.
There was no catalyst this quarter.
Very solid fundamentals in the quarter.
The outlook revenue was better than expectations by about 5 to $6 billion versus consensus.
The trouble is, the gross margin came in in line with expectations, and I think the market was looking for.
A bit more upside and so we've seen the shares underperform and I think what they're looking for next is what's going to be the next big thing, what's going to drive upward revisions in Alpha Generation.
That is the question that all of us are asking, especially on the heels of that earnings report, especially because we saw other chip makers fall and the price action and Nvidia shares yesterday.
So the question here, especially given Jensen Huang's comments, is, are companies outside of big tech actually monetizing AI fast enough to justify their spending?
That's the question.
I mean, I think it's going to potentially create a stock selection environment that we haven't seen for a while because it's just been a rising tide lifts all boats for AI and now.
It's like, well, who's actually making money?
Who's seeing productivity, who's seeing efficiency, who's driving revenues from AI, and these are really important questions that investors are going to have to grapple with and of course the Nvidia earnings report that is something that all of us were anticipating and while the earnings season is winding down when you're doing your fundamental as well as technical analysis of this key name, what is your outcome right now?
The outcome right now is that we're looking very carefully at where we're seeing upward revisions in our data and our models, and we see memory is very strong, we're seeing.
An acceleration in volumes and pricing, but we also were surprised by Dell last night.
Dell surprised to the upside.
They delivered a very solid quarter.
But what really surprised the market was the much better than expected backlog for AI servers and the outlook that they have for this year and for the. year for this quarter this coming quarter and for the full year was much better than expectations you just touched upon Dell, so we all know that when it comes to artificial intelligence there has been concerns about a disruption due to AI.
So there's been focus on hardware as well as software.
So how are you looking at this right now?
I'm really looking at what components essentially fit into the infrastructure in a way that is driving increased demand, higher prices.
That's a great investment scenario.
And then we'll see where it goes from there.
I think what I see in the component space is that it reminds me of what Nvidia looked like 2 years ago.
So I remember us sitting here and I'm like, wow, these upward revisions are pretty powerful.
We might want to take a look at this stock.
That's what I'm seeing in some of the components.
Right now and Melissa on this Friday morning we're seeing plenty of headlines when it comes to artificial intelligence and as well as deal making news, but of course there are also national security concerns geopolitics come into play when it comes to Nvidia.
So what does that mean for the chipmaker going forward? markets are not very good at making in or estimating risks geopolitically.
Assess the fundamentals and try to identify where.
The company is going to go and just bake that into whatever they're forecasting and look at valuations around that.
There isn't really, so to speak, geopolitical discount.
It just isn't something markets do very well.
Yes, and of course all of us were listening in on that earnings call for Nvidia after the closing bell earlier this week.
So what were your key takeaways and what do you think is important to keep in mind?
Demand is really strong.
They're continuing to see the AI trade continue.
I think the one big thing that many investors and followers of Nvidia took away was that Jensen kept reiterating that compute equals revenue.
So I think we're trying to get our heads around that.
What does that really mean?
What are the repercussions of that?
What implications could that have for other areas of the market?
And I do want to ask you about the competition out there, whether we're talking about stateside or even in China, because there have been a lot of comparison to what we're seeing in artificial intelligence to say the railroad era or even the internet age.
So how are you looking at the competitive advantage of Nvidia?
Nvidia is essentially building the infrastructure.
They're transforming existing data centers from generalized compute to.
Accelerated compute which enables parallel processing.
It enables multiple applications, programs, tools to run at the same time, and that's essentially what they do.
That lays the groundwork for generative AI to happen.
So I think from there then we can really make our bets in terms of what is going to drive some of this end user growth.
Yes, and Melissa, finally, before I let you go, what did you make of their guidance?
What are you forecasting?
So I essentially look at consensus and try to understand where the market is and then try to look at the direction of travel from a revision perspective and essentially what we see is that gross margins came in line with expectations which suggests that we didn't see that upward revision that upward revision trajectory that we normally.
Potentially in a quarter from Nvidia.
Melissa, it was great talking to you.
Thank you so much for weighing in on the earnings report.
I'm sure we'll continue to monitor the stock price in today's session as we are looking at shares off in pre-market trade as well.
Have a great weekend, Melissa.
You too.
Thank you very much.
