Nvidia (NVDA) silenced critics in a significant way Wednesday night. The company beat the top and bottom line with impressive earnings per share of $1.09 compared to a consensus of $0.92.
The true bear killer, though, is revenue guidance for next quarter. Nvidia guided revenue to $11 billion next quarter compared to estimates just above $7 billion. I can't recall the last time I witnessed guidance that strong in a company of this size. Four billion dollars. That's billion with a B.
Yesterday, I thought the stock would break out if it moved above $320. The stock quickly popped above that level on the announcement into the $323 to $325 range. From there, it marched to $365 within 15 minutes.
Did I want to buy above $320? Yes.
Will I chase above $350 to $400 on the day after earnings? No, probably not.
Nvidia broke above the $900 billion market-cap level within 20 minutes of its earnings release. The trend to $1 trillion appears clear now. I'm thinking of it as a stock that breaks above $90 and gets pulled to $100 more often than not.
While the debt ceiling and US government default threat remain front and center, the results from Nvidia should keep money flowing into artificial intelligence names and corresponding semiconductor names.
As far as AI is concerned, the biggest benefactors in the near term will be the picks and shovels: chips, data storage, data transfer and software.
One of the most interesting developments from the action thus far this year is the influence a small handful of names continue to have on the Nasdaq and the S&P 500. It isn't just concentration, but the fact that the S&P 500 is becoming more like the S&P 10 each day.
Nvidia appears poised to be the fifth member of the current trillion-dollar club. And as ETF investments continue to climb, and those ETFs are based on market-cap weighting, we increase concentration risk for the markets. These five names will continue to find dollars pouring into them by those looking for even basic exposure to the S&P 500 and the Nasdaq. We've experienced these ebbs and flows in the past. While the unwind can be a little rough, it usually isn't quick or cash-like. Top names are top names for a reason. They have business momentum, so until that changes, longs can and should enjoy the momentum ride.
