NVIDIA recovers $100! Overcoming the SMCI financial shock and running out of bad material?
Is NVIDIA running out of bad material?
$NVIDIA (NVDA.US)$ The downward trend has continued since mid-July,The milestone of 8/7 broke through the $100 range. Is 8/7 notable for AI stocks $Super Micro Computer (SMCI.US)$ The fact that it plummeted 20% after financial results were announced resonated. Since SMCI manufactures servers equipped with NVIDIA AI semiconductors, the company's financial results attracted attention as showing demand trends for NVIDIA products.Next 8 days, NVIDIA shares rebounded 6%,Recovering to the $100 levelI did it.
Does this backlash indicate that bad material has run out? From SMCI's financial resultsDemand forecast for NVIDIA AI semiconductorsYaCheck the impact of the latest Blackwell delaysThen, search for the answer. More important to NVIDIABig Tech capital investment planswithAlso check out the investment environment surrounding AI stocksI'll do it.
SMCI temporarily attracted attention as an AI stock with more momentum than NVIDIA. This is because the company manufactures servers equipped with AI semiconductors made by NVIDIA, and it has strengths in “liquid cooling,” which is advantageous in AI data centers.
Due to the rapid expansion in demand for AI data centers, SMCI's business performance continued to expand at a pace that exceeded market expectations. However, according to the current financial results,Profit margins and adjusted earnings per share (EPS) fell short of market expectationsThen, it was a negative surprise.
● Sales increased, profit margins fell more than expected, and adjusted EPS was also lower than expected
◇24.6 Term April-6 Term (4Q) Results
・turnover: 5.31 billion dollars, slightly lower than the market forecast of 5.32 billion dollars
・Adjusted EPS: $6.25, well below market expectations of $8.25
・Gross profit margin: 11.3%, significantly lower than market expectations of 14%
(17.1% in the same period last year; 15.6% in the previous quarter)
◇24.6 Term April-6 Term (4Q) Results
・turnover: 5.31 billion dollars, slightly lower than the market forecast of 5.32 billion dollars
・Adjusted EPS: $6.25, well below market expectations of $8.25
・Gross profit margin: 11.3%, significantly lower than market expectations of 14%
(17.1% in the same period last year; 15.6% in the previous quarter)
◇25.6 July-September Term (1Q) Guidance
・Net sales: 6 billion to 7 billion dollars, significantly exceeding market expectations of 5.47 billion dollars
・EPS after adjustment: $6.69 to $8.27, lower than the median market forecast of $7.58
・Net sales: 6 billion to 7 billion dollars, significantly exceeding market expectations of 5.47 billion dollars
・EPS after adjustment: $6.69 to $8.27, lower than the median market forecast of $7.58
◇Full year guidance for the 25.6 term
・Net sales: 26 billion dollars to 30 billion dollars, significantly exceeding market expectations of 23.64 billion dollars
・Net sales: 26 billion dollars to 30 billion dollars, significantly exceeding market expectations of 23.64 billion dollars
● Will profit margins recover in the medium to long term, and will pressure continue in the short term
At this financial results briefing, the most common question from analysts was about margin (profit margin). The management team explained that the decline in profit margins was mainly due to “customer and product mix, and initial production costs for new DLC (direct liquid cooling, *) technology.” It is said that supply chain issues and the sharp rise in DLC component costs have also depressed profit margins.
At this financial results briefing, the most common question from analysts was about margin (profit margin). The management team explained that the decline in profit margins was mainly due to “customer and product mix, and initial production costs for new DLC (direct liquid cooling, *) technology.” It is said that supply chain issues and the sharp rise in DLC component costs have also depressed profit margins.
* “Air-cooled” is the mainstream in data centers, but the introduction of “liquid-cooled,” where SMCI has an advantage, is progressing. This is because AI data centers consume a large amount of electricity compared to the past. The company says that DLC can reduce data center electricity consumption by 30% to 40%. At this financial results briefing, the management team emphasized that the introduction of liquid-cooled racks is expected to accelerate in the future, and that business opportunities are huge.
Regarding future profit margins, management predicts that if DLC and data center building block solutions are shipped in large quantities later this year, short-term margin pressure will ease, and they will return to the normal range (target range for gross margin ratio is 14% to 17%) by the end of the 2025 fiscal year. In other words,Profit margins are expected to “recover in the medium to long term, but pressure will continue in the short term”It became. Heavy developments in higher prices may continue until an improvement in profit margins is shown.
●Investment decisions and target stock price cuts stand out
After financial results were announced, investment decisions made by analysts and cuts in target stock prices were conspicuous. The decline in profit margins seems to have come as a surprise to many analysts.
After financial results were announced, investment decisions made by analysts and cuts in target stock prices were conspicuous. The decline in profit margins seems to have come as a surprise to many analysts.
After SMCI's financial results were announced, NVIDIA became entangled and cheap. Is the reason for the decline because SMCI's financial results showed weak demand for NVIDIA products? The answer is “NO.” According to SMCI's financial results, sales guidance for the fiscal year ending 7-9 and the full fiscal year 26.6 significantly exceeded market expectations. In other words,Sales of servers equipped with NVIDIA AI semiconductors are expected to remain strongIt became.
Nevertheless, NVIDIA stocks depreciated because stock prices fell by as much as 20% due to questions surrounding SMCI's profitability. In addition to SMCI, there were stocks whose stock prices had plummeted due to a slight decline in performance in the current financial results, so there were concerns that sentiment surrounding AI stocks would deteriorate.
According to some reports, there is a possibility that the release of NVIDIA's latest AI semiconductor Blackwell will be delayed by about 3 months due to suspected design flaws. When asked about this, SMCI's management team answered as follows.
“We don't know exactly how long Blackwell will be delayed. However, for the 7-9 fiscal year, I definitely don't expect Blackwell quantities. The October-December term will be very small. Generally, quantities are small for engineering samples. Therefore, actual production (on a fixed scale) should be in the January-March fiscal year next year.”
Based on the comments above,Blackwell's delayseems to be true. If that is the case, it means that Blackwell's sales records will also be delayed for NVIDIA. whoseAbout the impactSome analysts say that even if the sale is slightly delayed,It is predicted that sales for the August-October fiscal year will be approximately 1 billion dollars, and will remain around 20 to 3 billion dollars even in the November-January fiscal yearDoing it.
Goldman Sachs said”Although the postponement is not ideal, it is unlikely to affect NVIDIA's profitability or market power in 2025” I'm looking at it. The analyst in charge advises investors to stay calm and continue with their current strategies. He also pointed out that Blackwell's postponement is an opportunity to increase positions. (from Bloomberg)
Also, after Blackwell's postponed coverage, NVIDIA'sThere is 1 analyst who lowered the target stock priceIt was.7People maintain conventional target stock pricesThen it was stated,4 people raised target stock pricesthat's it.
NVIDIA's main customer listTo $Microsoft (MSFT.US)$ with $Meta Platforms (META.US)$ , super micro, $Alphabet-A (GOOGL.US)$ 、 $Amazon (AMZN.US)$ are lined up. In other words, TOP5 is big tech outside of Super Micro.
abovementionedFinancial results for the 4 Big Tech companiesSo what is important for NVIDIA is each company's capital investment outlook, and investment plans for AI. As for thisAll four companies intend to expand capital investment for AII showed it. For example, Meta raised the lower end of the range by 2 billion dollars from the conventional 35 billion dollars to 40 billion dollars from the conventional 35 billion dollars to 40 billion dollars with respect to the full capital investment forecast for the 24.12 fiscal year. The management explained at the financial results briefing that they plan to drastically increase investment in AI infrastructure next year as well.
Based on the capital investment forecasts of the Big Tech companies,Strong demand for NVIDIA's AI semiconductors is expected to continueIt became.
The expansion of capital investment by the four Big Tech companies has not boosted NVIDIA's stock price this time. This is because the market environment has changed drastically compared to the previous fiscal season.
First,While profitability is being questioned over AI stocks, financial results of major companies are mixedIt was. On the other hand, from an overall perspective, corporate performance is not necessarily bad,There is no denying the feeling that investors reacted greatly to even a slight decline in performance this time。
For example, sales of Microsoft's cloud business Azure for the April-6 fiscal year increased 29%, and growth slowed slightly from a 31% increase in the previous fiscal year. The contribution from AI was about 8 points, up from 7 points in the previous quarter, but stock prices fell. For companies such as Microsoft that have continued to steadily expand their business performance, it can be said that the difference between a 29% increase in sales and a 31% increase is not a cause for much concern in the medium to long term.
Nevertheless, the reason why Microsoft stocks fellThe background is valuation concerns and US recession concernsIt's in. Furthermore, after adjusting footsteps, 7 major US tech companies“M7” is a great buying opportunity in terms of valuationIt has been pointed out that there is a possibility that it is More details”Is the “Mag 7” stock price continuing to fluctuate and fall an opportunity for push buying?Please refer to”.
Next, as concerns about the US recession intensified, it seems that tech stock sales associated with the reversal of yen carry trade also promoted risk off. Regarding the rewind of the yen carry trade, there is also a view that about three-quarters has been resolved, and the impact of this is expected to decline. Therefore, in the future,What is important for NVIDIA and AI stocks is US economic trends and the Federal Reserve's monetary policyIt seems that it will be.
NVIDIA shares rebounded 6% on 8/8 and recovered to $100Recession concerns recedeThat's because I did. The number of new unemployment insurance claims for July announced on the same day fell short of market expectations. Regarding the beginning of the US recession, employment statistics and unemployment rates have deteriorated, and although that probability has risen, it is not the main scenarioUnderfoot consensusIt has become.
If economic indicators leading to recession concerns recession increase in the future, it will be positive material for NVIDIA and tech stocks. For NVIDIA,The financial results announcement on August 28 is more important than anything elseLet's be. If the expansion of capital investment by Big Tech and the strong demand shown by Super Micro are reflected in business results, it may lead to a full-scale review.
8/9/24 Market Analyst Amelia
Source: Company materials and created by MooMoo Securities from Bloomberg
Source: Company materials and created by MooMoo Securities from Bloomberg
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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