Time was that earnings reports from chip giant Nvidia provided moments of celebration for the extraordinary success of a U.S. original who led it for 33 years.
Nvidia NVDA became the world’s most valuable company (until recently) because its graphical processing chips made artificial intelligence possible and has set off the massive wave of data center development around the world.
The results for the company’s third fiscal quarter, to be reported after the market close on Nov. 17, will be terrific, at least on the surface. Nvidia’s revenue should be around $109 billion, up nearly 50% from a year ago and up about 13% from the second quarter, according to Opening Bell Daily.
Earnings per share are expected to hit $2.48, up from $1.30 a year ago and 11.7% from the second quarter.
Read More: Jensen Huang was ‘broken and shattered’ in final hours as Nvidia CEO
Would that the earnings and the analyst call that follows were so simple.
Nvidia and its investors have been going through a major soul-wrenching since Oct. 29, when The New York Times reported on CEO and co-founder Jensen Huang’s involvement with Alice Huang, a woman whom intelligence officials believe was a Chinese spy. Then, reports broke that Jensen Huang had had affairs with two company employees.
Nvidia shares rose nearly 4,000% between the end of 2019 and its closing peak of $239.24 on Oct. 6, making Jensen Huang a rock star among corporate bosses — and a confidante of President Donald Trump.
But it all ended with his resignation on Nov. 12.
Shareholders take a big hit
Nvidia’s shares are off 24% since the Oct. 29 story broke. Worse, they’re off 33% since reaching a 52-week high of $243.37 on Oct. 6. When the shares closed that day (at $239.24), they were up 28.3% for the year.
And as of Nov. 13 (when the stock fell 2% to $162.85), Nvidia is down 12.7% for the year.
No fewer than nine investment houses downgraded their opinions on the stock. Two cut their price targets.
More Nvidia:
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- Nvidia has a stake in SpaceX that came from an unexpected place
- Nvidia’s $12.9 billion deal could shape the AI apps you use
Nvidia faces a big week of scrutiny
Nvidia will demand attention and not just because Jensen Huang is no longer CEO. The earnings call will be run by interim CEO Colette Kress, who has been Nvidia’s executive vice president and chief financial officer since 2013.
In addition to questions to interim CEO Kress about the company’s outlook, analysts may well probe:
The China spying scandal. Jensen Huang’s involvement with Alice Huang is an issue because she was an executive at Megaspeed, a company in Singapore that bought Nvidia chips and related equipment and software ostensibly for distribution in South America.
But the allegations are that Megaspeed diverted the products to Chinese companies in violation of U.S. export rules. (For several years, reports have suggested that companies in Singapore would buy Nvidia equipment, repackage it and ship it to China.)
Nvidia’s bankrolling activities. At the end of the second quarter, Nvidia owned $47 billion in stock and other securities in publicly traded companies, according to its second-quarter Securities & Exchange Commission filing. As important: It also owned $48 billion in securities in non-public companies, the filing says.
It is believed $30 billion of that total is in OpenAI, which remains a private company. It has committed to investing $10 billion in Anthropic after its IPO. In addition, the company has been helping smaller customers buy Nvidia chips by offering credit terms.
Nvidia’s succession planning. When Jensen Huang resigned, Nvidia had no succession plan. Moreover, Huang is 63. So it is now looking for a new CEO, a process that may take a year or more. (President Trump has nominated former Apple CEO Tim Cook for the job, although he is still Apple’s executive chairman.)
Nvidia’s organization chart. Huang also ran Nvidia with a very horizontal organization with some 60 executives reporting directly to him. An Inc. magazine article derided the structure. “Designing a company where every road runs through the founder’s desk does not just cut red tape. It plants a live grenade under your company’s valuation.”
The bulk of Nvidia’s business is with the so-called hyperscalers, including Google-parent Alphabet (GOOGL), Amazon.com (AMZN), Microsoft (MSFT) and Meta Platforms (META). It also owns stakes in companies such as CoreWeave (CRWV) and Nebius (NBIS).
A busy week for earnings, economic reports
By the end of the week, most of the media talk about the stock market ahead was basically about Nvidia, which doesn’t do justice for what will be a week of important earnings and economic reports.
And, oh yes, the projected initial public offering of Anthropic, due after the Nov. 18 close with trading expected to begin on Nov. 19.
Earnings scheduled for release next week include Walt Disney (DIS), Home Depot (HD), Lowe’s Companies (LOW), Target (TGT) and Walmart (WMT).
Plus there will be lots of talk about Friday’s grounding of all commercial aircraft. The grounding may affect airline stocks.
For all the attention lavished on Nvidia, stocks had a fairly good week, with the Standard & Poor’s 500 Index up 2.5% to 7,562. The Nasdaq Composite Index added 2.5% on the week, despite a loss on Nov. 13. The Dow Jones Industrial Average added 2.1% on the week to 52,348.
What the retailers will say
A number of the biggest retailers will be reporting next week, ending on Thursday with Walmart.
The key question for all of them, especially Home Depot and Lowe’s Companies, will be to describe consumer health and confidence.
Business for Home Depot, due before the Nov. 17 open, and Lowe’s, due a day later, depends a great deal on whether people are buying homes or renovating their homes, and interest rates have been a challenge.
Two economic reports will reinforce that question:
- The Housing Market Index from the National Association of Home Builders, due Nov. 17 at 10 a.m. ET.
- The Commerce Department’s report on October housing starts, due on Nov. 18.
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