Jensen Huang is flexing extra hard this week

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Happy Tuesday, folks.

It was a sunny one this weekend in San Francisco after months of fog and rain, so if you see me walking around looking particularly red this week, just know that I don’t regret writing this while being scorched by solar rays.

Nvidia's Earnings Mean We’re No Closer to Rate Cuts

Nvidia reported earnings after the bell on Wednesday in possibly the most anticipated announcements since LeBron announcing he was taking his talents to Tootsie's Cabaret South Beach.

And luckily for all of us, they rose to the occasion.

Every member of the Magnificent 7 has been a beneficiary of the AI craze, but perhaps none has vaulted from relative anonymity (at least to 95% of people on the street) to one that even ESPN analysts are tweeting about as the “MVP of the stock market” like Nvidia has.

The stock experienced a dramatic 237% rise in 2023, and it’s up another ~64% to start 2024.

The company’s chips are an essential component of the AI-conomy, the mitochondria of the tech cell.

Justified by fundamentals or not, it has surpassed the likes of Google and Amazon to become the fourth-largest company in the world, crossing the $2 trillion mark on Friday.

$NVDA serves as the de facto AI market tracker, and as the stock has continued to soar, questions have emerged around whether kindergarteners having ChatGPT-themed birthday parties means that we’re in a ~bubble~

If Wednesday’s results are a proper indication, then the answer is an astounding no.

The company managed to blow away the already sky-high expectations, impressing the many viewers who tuned in after CNBC displayed a countdown to earnings in the 24 hours leading up to Jensen Huang donning his leather jacket for investors.

Some quick hits:

• $22.1 billion in revenue (beat expectations by more than 7%)

• YoY sales were up 265%

• Profit was up 765% YoY

The company could have done even better numbers but literally did not have the capacity to meet demand.

Even for the most optimistic of investors, the results were better than could have been hoped for.

The stock added $250 billion in market cap, going from down almost 6% to up 14%. The rest of the week was good vibes for the market, which makes sense considering the stock makes up nearly 25% of the market at this point.

Full transparency, my expectations were for disappointing earnings and the end of this bull cycle.

While AI is a generational technology, much of the initial captivation has worn off, and I expected Nvidia’s numbers to show slowing adoption.

So far, I’m wrong, but I’m not ringing the bell just yet.

The S&P seems to showcase a strong economy, but there are too many other indicators pointing towards a downturn, beyond the fact that even the market itself is really just a success story of a handful of big companies.

Further, these misleading metrics actually make rate cuts less likely despite their benefit to 95% of the economy. Goldman Sachs even changed their prediction that the Fed will switch it up in March.

For startups, Nvidia’s blowout means that money for AI isn’t dried up yet.

However, it means that the collective venture market is no closer to recovery. The role of interest rates is often overlooked, but it impacts the amount that firms are able to raise/deploy as well as exit opportunities.

We’re no closer to cheap money. If anything, the inevitable burst might be worse as we continue to inflate.

Prepare for any potential outcome.

• Hold onto precious cash, which at least earns higher yields in the bank for now

• If you can raise, get as much as you can, put it away, and try not to worry as the rest of the market burns down around you

I genuinely hope that I’m wrong, and the economy really is as strong as these select few stocks suggest it is. However, my portfolio is on a tight stop-loss leash.

Nvidia's earnings exceeded expectations due to the AI surge, bolstering its stock and emphasizing its significant role in the tech sector, but this success does not suggest imminent interest rate cuts, indicating a need for cautious financial planning in the tech and investment communities.

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Cheers to another day,

Trey