Nvidia's Night: Here's What I'll Be Watching

You Know What Day It Is? Wednesday? Kohl's KSS earnings day? While the answer to all of these questions is technically "yes," those are not the correct answers. At least not this time. This is the day, or more specifically, tonight is the night, that investors have looked forward to since before the large banks kicked off the season back in mid-July....

Nvidia NVDA reports tonight and, to a degree, for some time now, as goes NVDA, so goes the U.S. stock market. Over the last couple of years, after having already been the leading chip designer for the data center / cloud, for gamers and even for cryptocurrency miners, Jensen Huang has positioned his company as the "arms dealer" or preferred infrastructure-building block provider for all things generative AI.

There are other players. Advanced Micro Devices AMD is legit. Marvell Technology MRVL, who reports tomorrow, is trying. That said, Nvidia has built a huge lead in the space. How Nvidia reports and what is said during the post-earnings conference call matters. To the company. To the market. To the economic future of corporate America across the Mag-7 hyperscalers, of course, but also eventually extending in tentacle-like fashion into nearly all corners of literally every single business. Huzzah? That will depend on how likely one's own position will be threatened by this progress and how invested in that progress one is.

They do say, if you can't beat 'em, join 'em. Well, if generative AI does eliminate the position, the newly unemployed individual might as well profit off of his or her own elimination... no?

What to Watch

What to look for tonight when Nvidia goes to the tape? What not to look for? Those are the questions. The very first thing or things to watch for will be sales and production of the Blackwell architecture GB200 and GB300 server systems. The company is still producing and selling the GB200, while increasing production of the GB300. These systems include 72 graphics processing units linked together inside one server rack. That's up from just eight from what Nvidia was selling last year. Rock on.

Are customers in such need that they are snapping up the GB200's or slowing down in anticipation of the even more advanced GB300s? Total cost of ownership (pay attention here), which includes both the sale price and expenses incurred during operation are expected to drop significantly from the GB200 to the GB300, so this could be a "thing." Additionally, has ramping up the next great thing while selling the last great thing pressured margin? Of course. Is that priced in? Or is mass adoption of that next great thing what is priced in?

We do know, as Barron's has reported, that Foxconn, which is a large manufacturer of AI-capable servers for Nvidia is projecting 170% revenue growth in the sales of these servers for the current quarter. Sales of these racks are expected to triple from one quarter to the next. That means Nvidia is spending. One would think that to spend like that, Huang must have the orders in place. Right? Yeah, no spit, Chili Dog.

How About China?

We do know that Nvidia has been permitted to resume shipments of the less capable, but still quite powerful, H20 chips to China. But the sale of these chips that are built on Nvidia's Hopper architecture (which is so 2022) but toned down from the H100 chips that were originally China-compliant, have seen some pushback from Beijing.

The Chinese government has complained of security concerns that it has associated with these H20 chips. Many feel that Chinese designers and manufacturers have caught up to where this chip is, technologically. So, Beijing doesn't see the need to purchase what it sees as yesterday's roast beef from an American designer. Maybe Beijing is simply playing the game and trying to cut a better deal. Hmmm.....

Last week, on this matter, Huang said "Hopefully, the response that we've given to the Chinese government will be sufficient. We are in discussions with them." Huang also added that the company is in discussions with the Trump administration to potentially sell something more powerful than the H20 to Chinese clientele.

Lastly, Robots...

Nvidia has already launched "Jetson AGX Thor," which is powered by a Blackwell architecture GPU with 128 gigabytes of memory. The developer kit and production modules meant for the manufacture of humanoid robots come with 7.5-times more AI-capable computing power than its predecessor. I keep thinking of the Jetsons' robot maid. The kits are generally available right now.

Nvidia will obviously have to update the investing public on what kind of interest there is from those building out all kinds of robotics, but especially humanoid robotics. We already know that early adopters include Amazon AMZN, Caterpillar CAT, Medtronic MDT, Meta Platforms META and others. We also know that OpenAi, and Deere DE are at least kicking the tires. The kit starts at $3,499.

Confirmation Day?

I don't know. I mean, technically, by the letter of the law, yes, on Tuesday domestic equity markets confirmed Friday's bullish change of trend, which is really just a continuance of the greater overall trend. While Tuesday was indeed a "green candle" day and it did come on increased day over day trading volume, I generally like to see something more face-ripping on such days. So, while technically confirmed, I will continue to keep my head on a swivel and remain cognizant that with September often comes bearish activity. Lions and tigers and bears, oh my. More like snakes, killer bees and ants larger than a quarter. Don't sleep, Tex.

The S&P 500 tacked on 0.41% on Tuesday as the Nasdaq Composite added 0.44%. How's that for uniformity? The market was kinder to the mid-majors than it was to the majors. The KBW Banks gained 1.28% for the session as the Philly Semiconductors gained 0.9% and the Russell 2000 gained 0.83%. Perhaps more important than the strength in equities on Tuesday was the strength in Treasuries. The U.S. Two-Year Note paid 3.68% by day's end, down four basis points coming off of what was a strong auction of $69 billion worth of 24-month paper.

Breadth

Seven of the 11 sector SPDR ETFs traded higher on Tuesday, led again by the cyclicals, in this case, the Industrials XLI and the Financials XLF. Once again, defensive sectors populated the lower rungs of the performance tables. That's generally seen as a forward-looking indicator of improved economic activity. Staples XLP were the dog of the 11 funds with defensives taking two of the bottom three and three of the bottom five slots.

As mentioned above, Tuesday's price discovery does not present as a rip-roaring rally. Winners did beat losers by a 7-to-6 margin at the NYSE and by a rough 3 to 2 at the Nasdaq. Advancing volume took a composite 63.6% share across Nasdaq-listed trade and a 55.1% share of NYSE-listed activity. Aggregate trade increased by an impressive 16.6% on a day over day basis across those NYSE-listings but still remained on the light side. This is a week with a holiday weekend attached. Some decision makers are on the beach. Aggregate trade was up 7.6% day over day across Nasdaq-listings. ​

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That all said, it is worth noting how much more activity there is of late on green candle days than there is on red candle days. That's our technical confirmation. The back circle / oval type thing I drew on this chart illustrates that activity.

In Other News...

- Durable Goods Orders for July to include Core Capital Goods Orders (which is a proxy for business spending) pleasantly surprised on Tuesday. The Richmond Fed Manufacturing Index and the Conference Board's August survey for Consumer Confidence both showed better results than had been anticipated. Makes sense with the defensive sectors lagging the broader market.

- Apple AAPL will hold its next dog and pony show, I mean its next annual product launch event on Tuesday, Sept. 9. Enter the jugglers and the plate-spinners. CEO Tim Cook has referred to this event as "awe dropping." I would have probably said either "jaw dropping" or "awe inspiring" but he is the chief executive of the greatest consumer electronics company in history, and I am not. I am, however, the CEO of a small office out on Long Island, and he is not.

- In a mildly disturbing televised interview on Tuesday, Commerce Secretary Howard Lutnick talked about the federal government potentially taking stakes, now that Intel INTC is part of the family, in the defense contractors. Sure, I am long a few of these defense and aerospace names, and I benefited from those headlines. but as readers know I am uncomfortable with federal participation in corporate America. We'll see how this plays out. Free market capitalism 4-eva.

Economics 

(All Times Eastern)

07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 6.68%.

07:00 - MBA Mortgage Applications (Weekly): Last -1.4% w/w.

10:30 - Oil Inventories (Weekly): Last -6.014M.

10:30 - Gasoline Stocks (Weekly): Last -2.72M.

The Fed

(All Times Eastern)

12:45 - Speaker: Richmond Fed Pres. Tom Barkin.

Today's Earnings Highlights 

(Consensus EPS Expectations)

Before the Open: ANF (2.32), SJM (1.93), KSS (.30), WSM (1.80)

After the Close: A (1.37), COO (1.07), CRWD (.83), FIVE (.62), HPQ (.75), NVDA (1.01), SNOW (.27), URBN (1.48)

At the time of publication, Guilfoyle was long CRWD, NVDA, AMD equity.