Wall Street Unplugged
Episode: 1012February 23, 2023

The downside of NVDA’s earnings blowout

Guys, I’m so excited about next week’s launch of WSU Premium, where I’ll be expanding the scope of the podcast and offering more benefits… from tons of new trading ideas to insightful interviews from the smartest minds on Wall Street… and much more.

I explain why I’m starting this new, improved podcast… how I want to change the financial newsletter industry… and why I’m so passionate about helping individual investors. It’s the main reason I made this product affordable for everyone. Here’s how you can join us.

Turning to the markets, NVIDIA (NVDA) is up more than 10% after reporting solid earnings.

I deep-dive into the results… why NVDA needed to post strong numbers… the company’s guidance going forward… and the drawbacks that come with its recent success (while its competitors have underperformed). 

I also explain why analysts are being short-sighted about the stock… and whether I’d buy it at current levels. 

Inside this episode:
  • Why I’m so excited about WSU Premium [0:30]
  • How I want to change the financial newsletter industry [11:35]
  • Breaking down NVIDIA’s strong quarter [22:38]
  • Should you buy NVDA right now? [31:50]
Transcript

Wall Street Unplugged | 1012

The downside of NVDA’s earnings blowout

Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on Main Street.

Frank Curzio: How’s it going out there? It’s February 23rd. I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break down the headlines and tell you what’s really moving these markets.

Frank Curzio: So, guys, next week, mark your calendars. I’ll be launching Wall Street Unplugged Premium. It’s going to be a paid product, including two podcasts, which is Frankly Speaking, which is a Q&A I do for paid subscribers, and another podcast where Daniel and I are going to be breaking down stocks and ideas, similar to… I’m going to break down Nvidia for you right now, which reported strong earnings and is surging to 14% today. Not all positives though, definitely want to hear analysis. You hear stuff that you’re not hearing on TV, as everyone foams at the mouth, is excited and going crazy. Which that little voice in your head should be saying, “Watch out,” when people get crazy and bullish on stocks after they’re up 50%. It’s usually a sign that you have to worry, but these numbers were good. They’re really good, and I’ll break it down in a minute.

Frank Curzio: But Daniel and I are going to be recommending, in this new service, Wall Street Unplugged Premium, going to be recommending a trading idea every week. This trading idea is going to be found in our Dollar Stock Club portfolio. All that is included, right? It’s included in Wall Street Unplugged Premium membership, but it’s a newsletter that you’re going to see short-term trading ideas from every and any asset class. For example, we recommended Silvergate in this portfolio. Risky. This was back in August 2020. Silvergate has gotten annihilated now, however, we recommended it during its growth trend. August 2020 at $14. $14.72 cents will be exact. We took profits in June 2021, the stock surge to 133. That’s a 581% gain in less than a year on that position.

Frank Curzio: November 17th, only a few months ago recommended Solana, which another crypto in our portfolio, against a trading idea. Sold off tremendously. One of the better names in the space. It’s up 72%. Recommended Uber in December this year, 26 to 34 today, up 30% in two months. Of course, we recorded losing positions in this portfolio. We do have tighter stops in these trading positions, where it’s a portfolio designed to have unlimited upside but limit risk on short-term trades. So essentially, for the first time in our history at Curzio Research, we have a newsletter that’s going to allow you to take advantage and allow our subscribers, our people, our followers to take advantage of, there’s so many inefficiencies I see in the market on a daily basis. And it happens a lot, whenever they offer products like this. They see companies report earnings, could have news I believe the market is misinterpreting. Told you about that with Disney, when we watched quarter after quarter of the stock just went up and up and up to, what was it, 180 I believe? Because everyone was looking at one metric. That subscriber growth.

Frank Curzio: Well, listen to Chapek’s lies, I told you that that guy was going to get fired, even after he signed a brand new contract last year. He was lying how Disney+ was bigger and better than Netflix. In the meantime, he was lying out his ass. If you’re looking at average revenue per user, which is the average revenue per person that was signing, it was 70, 80% lower than Netflix. Nobody paid attention to this. Chapek was signing people for free on that platform. The main source of its growth was coming from where? It wasn’t coming from domestically, it was coming from international growth, and these subscribers were paying what? A dollar and change a month. No pricing power there. With Dollar Stock Club, we could take advantage of inefficiency like this. We can buy short-dated puts, could have resulted in massive gains. So we see this, and I see this, and Daniel sees this because we cover stocks every single day on a daily basis, as you could see with all the podcasts we’re doing.

Frank Curzio: You get all of this for just $10 a month. That’s it. If you’re looking at Dollar Stock Club, our original strategy thesis was to get a trading idea from all the guests I interview. So, I was interviewing guests every week, and then talk about them, and then I’d take a trading idea and then I’d throw it in that newsletter. But then, we realized that strategy wasn’t really working. For one, and I’m going to be dead honest here like I always am. I started tracking the performance of some of my guests, which I never really did. I mean, when you’re in CNBC and stuff, you hear them mention a stock here, stock there, but you never really go back. Even with Cramer, you never really go back to see where he’s recommended his stocks, where they’re going. I mean, he has a portfolio and that’s being tracked behind the paid in moat, but he mentions a lot of stocks outside of that. And that was my fault, because when I started tracking some of the stocks that they were recommending on my podcast, I noticed that the performance was not good.

Frank Curzio: And that again, that was my responsibility, and it really pissed me off. Because the only reason why I do this podcast and been doing it for 15 years, probably longer than anyone except for Andrew Horowitz, been doing it a couple months longer than me, who I love, is to help individual investors, right? Learn from the mistakes I made on Wall Street because Wall Street is vicious. It’s savage. And I don’t care if billionaires destroy billionaires, and rich people destroy rich people. You saw it best in Yellowstone, where you don’t mind killing wolves, but you don’t want to kill sheep. And when they go after mom and pop investors, that’s a big problem. That’s something I hate, and you see that and they take advantage.

Frank Curzio: But for me and starting Curzio Research, I always felt like it was my responsibility to put quality, the quality people in front of you, that can help you make money. And also, be upfront even with your losers, right? And be accountable. And in this world, that sounds f-ing crazy, right? And we live in a world where you get paid, regardless of whether or not you perform at your job or make your clients money, especially you see this in my industry in finance. You have hedge funds, they’re going to go bankrupt. They’re going to bankrupt their fund, lose money for lots of investors, but they were still able to keep all of those huge returns and fees. Those fees they generated for years and years, and years.

Frank Curzio: They’re able to keep that and pocket that money, while you get destroyed like, “Hey, I bought this and it’s up this year. It’s up this year.” Next thing you know, the fund blows up. You’re done. You lose all your money, but yet they collected so much fees. Shouldn’t they give that back? No, it doesn’t happen on Wall Street. And most of these guys are able to start up another fund a few months later, which I think is hilarious.

Frank Curzio: What about SPACs? We talked about SPACs over and over through 2020, 2021 of how ridiculous this was. This isn’t a new concept. It was a concept back in the day, that everyone just said the hell with it because it was a shitty concept, but it came back strong because we had a Super Bowl market. But this strategy essentially, provides a way for Wall Street, which is early investors, stuff that you can’t get into at very early prices. You get in a SPAC at 10, they’re getting in at a dollar, $2, $3, 50 cents, 20 cents, but it gives early investors the opportunity to exit their positions quicker.

Frank Curzio: You’re basically merging with a shell company that’s public, and within three to four months you could sell those shares, opposed to what? Being in a company that’s private, which usually takes seven to 10 years to have that liquidity period. Whether you IPO seven years later or if you get taken over, but it’s seven to 10 years. Now you got four months. They’re like, “Holy shit, we can get out of this, have more liquidity and get into the next situation. Let’s launch more SPACs, and more SPACs and more SPACs.”

Frank Curzio: They’re unloading these positions to mom and pop investors when most of you got annihilated, because you bought into the company’s huge marketing campaign and bullshit, telling you that, “The stock you’re buying is the next Nvidia. That’s why you should buy. Don’t look at the fundamentals. I know it’s trading a thousand times sales. It doesn’t matter. I know they’re not going to generate a profit till 2045. Don’t worry about it.” It’s funny how quickly that trend died. Soon as the Fed started raising rates and money wasn’t free anymore. It’s funny how early investors like Chamath, Richard Branson, made hundreds of millions of dollars off of your back. Almost everyone else buying Virgin Galactic lost their shirt, and are still getting killed today.

Frank Curzio: If you think about it guys, it’s not just finance, right? It’s across all spectrums. I mean sports, how many huge contracts have we seen? I’m a big sports fan as you know, loved sports all my life, played all these sports all my life. But how many of these guys signed massive contracts like Russell Wilson, Joe Flacco, and look at their performance afterwards. And you think it should be the opposite, right? Yeah, you play and it’s everything based on the past, and that’s what you’re getting paid for. And then you could suck. And I mean, Joe Flacco got that contract, then Baltimore was never the same. They couldn’t hire anybody because they paid this guy too much money, turned out to be shit, because he won a Super Bowl. Won a Super Bowl on the back of one of the best defenses in the world. But how many times have you paid someone upfront?

Frank Curzio: And this is me, with so many of the vendors with my new house, and they did a half-assed job. How many of you are paying more money to eat at your favorite restaurant, but the quality of service has gone down tremendously? Raise your hand. I bet you, all of you are raising your hand right now. Listen to this in your car, you’re like, “You’re right. I love this restaurant. But you know what? The service sucks, because they’re cutting costs. They can’t get employees, they don’t want to pay them more money.” They’ll charge you more money and make more profits themselves and blame inflation, even though their margins are going up incredibly, which means that they’re charging much more than their rising costs that they have to cover.

Frank Curzio: But getting back to my industry, I hate that there’s no accountability. The reason why I started Curzio Research, is it five years ago now? You have someone go on TV or Twitter, recommend stocks that are getting killed, or have a thesis and be wrong for many, many years and just keep shouting it out, shouting it out. “The dollar’s going to lose its reserve currency status.” Since 1975, these guys have been shouting that out. Same thesis. No matter what changes, they’ll never change. It’s a religion to them. That’s it. Don’t ever question it or I will punch you in the face.

Frank Curzio: These go on and on and on, and these stocks and their portfolios get killed while these guys just, some of them won’t even mention it again, like it didn’t happen. It’s like they never knew or maybe they do know, and they just don’t give a shit that thousands, sometimes millions of people are following them. They’re losing money following their advice, while these guys are making an absolute fortune. That’s what gets me pissed off at a lot of people who I won’t mention their name, who write books and make a fortune, while they have thesis and everything, especially through gold and all this, for like the last 10, 12 years. Holy shit. You sold all your stocks, market’s going to crash. The dollar’s done. Government’s spending too much money. They didn’t care the interest rates are zero and they were just, the Fed was flooding the market with money. They didn’t care. “This is my thesis, and that’s it.” And you get destroyed, but yet their wealth goes up, but yours doesn’t.

Frank Curzio: Specifically, in my industry, financial newsletter publishing, that’s the best. And you got people screaming, top of mountains, “You got to buy this pick because it’s going to go up 5000% in three weeks.” Yet, they’re not allowed to own it, based on that company’s policy. I mean, think about that for a minute. Next time you see a promotion, next time you see that something’s going to happen and it’s going to be huge, it’s going to be massive, where someone’s recommended individual stock. In Curzio Research, we own our stocks. We buy them after we recommend them. We don’t sell them before. So, we eat our own cooking.

Frank Curzio: If you are losing, chances are most likely I’m going to lose a lot more money than you, because we’re in a lot of these names. But you have people out there in the newsletter industry telling people, they really don’t know. They’ve given them their wonderful stocks, going to go up 5000%, just hold it for a couple weeks; yet, they can’t buy it. I mean, if they really thought it was going to go up that much, go up 5000%, don’t you think they would buy it for themselves to benefit their families, instead of benefiting a list of people that they never met before? And how many of you have actually met the person that you’re following within a newsletter? A lot of you met me. You’ll see me, you see my face. You see my face recommending this stuff in the newsletters. How often do you see that across the industry?

Frank Curzio: Anyway, don’t want to get into mini rant there, but it’s not how I was taught to do business. You have to perform to earn people’s trust. You have to educate them, help them make money, be accountable when you make mistakes, come out there and say, “Hey, this is on me,” and learn from them. You’re going to make mistakes no matter what you do. Learn from them. You’re going to get better and better and better. Embrace them, please embrace them. Don’t get pissed off. So, you don’t want to lose everything. That’s why when you have your most conviction, that’s when you should be the most nervous. When you have the most conviction in something, you should constantly find ways to figure out why you’re going to be wrong. Trust me, I’ve been there. You lose the most money on the things you’re most convicted in, because sometimes you just get blinded by your emotions. It took me a long time to learn that lesson, and it’s been a painful lesson. Lost a lot of money doing that.

Frank Curzio: But that’s how I was taught. It’s how my late dad ran his financial newsletter business for over 30 years. Also, when it came to our Dollar Stock Club newsletter, it was going against us in regards to our original strategy. Not every one of my guests is able to recommend a stock every week. Especially when I’m interviewing, say an economist. I’ve interviewed heads of state, writers, authors. But even it got to a point where hedge fund managers, fund managers, they used to interview all the time. Recently, this has been happening over the last, I’d say 12 months or so, they’re saying, “Hey Frank, you know what? I don’t really want to recommend any individual stocks,” getting shit from their compliance department. And I get it, there’s really no upside. Hey, if you want that, subscribe to our fund. And those stocks are in our portfolio, but they’re taking on a lot of risk. Who knows?

Frank Curzio: Making sure that, hey, we still have this in our portfolio. We didn’t sell any, whatever. They’re just like, “Hey, compliance said don’t even bother. If you’re going to go on some podcast, even if you know the guy, don’t recommend.” So, we weren’t really getting stocks from everyone I was interviewing. That was difficult. So now, you’re going to be getting these trading ideas every single week from me and Daniel. It’s only $10 a month. This is a service we could usually charge $50, a hundred dollars a month for. That’s the going rate for a trading product or an industry.

Frank Curzio: Trust me, this product’s going to be much, much, much better, because you’re going to be able to see us on video. I’m going to share my research tools, my research engines I pay over a hundred thousand dollars for. You’re going to see actually me and Daniel talking about these picks behind the paywall. Just like I’m again, about to break down Nvidia, more than anyone you’ve seen on CNBC today, and everything that you’re hearing. The full story, both sides, not from a, “I’m bullish on it,” and you could just highlight the bullish stuff. There’s some negatives there. Definitely some negatives there.

Frank Curzio: With Wall Street Unplugged Premium, you’re also going to get access to Frankly Speaking, and it’s a Q&A podcast. It’s for paid subscribers only. So, feel free to ask me any question you want. Email at frank@curzioresearch.com. I take that time every Friday. I do that for you guys. That’s my way of giving back. And a lot of times you’ll ask the same questions, be worried about the same things, or be bullish about the same things. And I’ll take those questions and just answer three or four of them. This is a bonus to anyone that is a subscriber, providing added value for you guys. Trying to help you guys out. I love getting the response. “Frank, I can’t believe you answered my question.” To me, that’s something that we should be doing, right? Providing that extra value. And, you’re going to get access to that, because the only people who have access to Frankly Speaking is anyone who is a paid subscriber to a newsletter, and Wall Street Unplugged Premium is a paid subscription now.

Frank Curzio: You’re not going to see that podcast on iTunes. You’re only going to get it as a subscriber, and subscribe to this service if you’re interested. Can only do it one way. Just go to www.wsuoffer.com. That’s wsuoffer.com. You don’t like it after one month and say, “Frank, you talked this product up and it was shit,” you can cancel immediately. Just cancel it. No problem. It’s up to you. But for $120 a year, honestly, I think it’s worth it just to get my Super Bowl pick every year, since you should have made a fortune on it. If you’re listening to this for the first time, the long-standing joke is I break down the Super Bowl every year, tons of analysis, data, break down the player’s individual positions, detailed analysis, making total sense on everything, on the trends, on what’s happening there. Everything. You would think I know exactly what I’m talking about, and I lose the f***ing pick every single year. Almost every single year.

Frank Curzio: I don’t know if it’s 10 out of 12 or nine out of 11, I lost count. Anyway, I always tell everyone after I have the pick, make sure you bet against me and you make a fortune. And I know anyone that has done extremely, extremely well. Especially, when it comes to gambling and betting on sports games. I mean that percentage is insane, right? So 80%, 75, 80% win rate is very, very good, but I’m sure most of you made over $120 betting against my Super Bowl pick. And that’s how much it costs for the entire year for Wall Street Unplugged Premium.

Frank Curzio: The bigger point here is I want to make this product infallible for every investor. And even if you don’t subscribe to Wall Street Unplugged Premium, I need you to do me a favor… Especially, if you don’t follow the markets. This is my job. I live and breathe it. I follow it every day. A lot of you have jobs and you want to listen to a podcast and get the breakdown. I get it. That’s what you pay me for. Find someone that you trust and please listen to them, because we’re going to have one free podcast on Wednesday, but it’s going to be about 20 minutes. Talk about more macro investing and stuff like that. But find someone you can listen to, because the next 18 to 24 months, it’s going to bankrupt a lot of businesses and a lot of people. This is the most dangerous market I’ve seen in at least the last 12 years. I could probably go back longer, heading into the financial crisis.

Frank Curzio: But again, the financial crisis, the Fed was there to bail us out. COVID, the Fed was there to bail us out. The Fed’s not there to bail us out. Even during the tech crisis, when you see the.com era, right? We saw two and a half years, the Fed was lowering rates considerably through 2001, through 2002, considerably. The Fed is not doing that right now, which is scary. They’re not there to help you when the shit hits the fan. They can’t, because we have runaway inflation for the first time in 40 years. So, you need to learn how to protect yourself. And, I don’t know if I’d say more importantly, but you also need to know when to get aggressive. Because when markets like this happen, you can take advantage. And there’s going to be tons of opportunities to make a fortune, create generational wealth for those positioned on the right side of the market fallout, that is close to 100% inevitable. And I don’t know about you, I’ve been doing this for a long time. And I know the Fed, they cannot control this type of inflation without forcing recession and crashing assets.

Frank Curzio: That recession might not take place this year. The market’s remaining resilient. It’s because you flooded it with 11 trillion in cash and there’s still some cash out there, even though you’re doing everything you can to stop it. But the Fed cannot control inflation without forcing recession, crashing assets, significantly weakening the economy, weakening the job market, which we’re not seeing. We’re still, we’re seeing wage growth. It never happened before, ever, with this type of inflation. Ever. We’ve never seen it. It’s usually ends up very, very poorly and badly for most people, for most businesses, A lot of businesses see it. They’re laying off employees and you hear on tv, oh it’s going to be a soft landing. There’s no soft landing when you have inflation. It’s not like you could snap your finger and, “Hey we did it, we control it. It’s lower.” You really think the Fed is even close to lowering rates right now?

Frank Curzio: They’re not even, they’re raising rates and inflation was going down. Disinflation. But what’s happening now? You’ve seen it go back up in a lot of areas. In areas it’s not, it’s slowing down in terms of the pace it’s coming down. And forget about, if we weren’t at 9%, 8%, 7%, and we said, “Hey, you know what? Inflation, it’s going to be at 6.4%.” The market would crash, because nobody would believe you. We haven’t seen that in decades and decades and decades, but right now it’s lower than 9%, so we’re happy. But it’s actually starting to tick back up in a lot of areas.

Frank Curzio: So again, the Fed cannot control inflation without forcing recession, forcing people to lose their jobs, reducing demand, crushing demand. And that’s going to happen. It’s inevitable. Could happen in three months, could happen in six months, 12 months, 18 months. It’s going to happen. Just be prepared. Make sure you’re listening to the right people, because I see a lot of people out there just blindly bullish, bullish, bullish, bullish. Same people that were bullish all last year when the NASDAQ fell 33%. Telling you to buy in Nvidia, all the way down from 300 to below 200, to 100, whatever. The whole entire time.

Frank Curzio: Yes, it’s come back. I’m going to break that down in a minute, but just be careful out there. Because these are the same people that are going to make money, regardless if you get smoked listening to them. That’s how they’re positioned. Not here. If I lose your money, you cancel your subscription. That’s it. We’re independent. We don’t get paid for anyone, by anyone, any company. Which I love, because it allows me to say whatever the f*** I want, and be honest with you without worrying about an agenda. So this podcast, going to be my last Thursday podcast on the free platform. Wall Street Unplugged Premium, we’ll launch next week. Again, to subscribe, go to www.wsuoffer.com.

Frank Curzio: Now, let’s get to a Nvidia. Yesterday, Daniel and I talked about the dichotomy, right? The contrast, the separation between companies in the same industry, where in the past you saw all the companies go up, all the companies go down in the industry if they pulled back. Some will go up a little bit more than others, but not now. You’re looking at, look at Walmart, strong. Home Depot, horrible. Meta, strong. Google, horrible over the past few months. Netflix strong, Disney falling off a cliff. GM crushing the estimates. Ford horrible. What do we see with Intel yesterday? Intel used to be a God. Industry leader in semis. Greatest company. And Krzanich went there, who’s the old CEO? I forgot his name, oh to my tongue anyway, you guys know, but it was the company, Intel. They just cut its dividend yesterday for the first time in 23 years.

Frank Curzio: I mean, this is a company that was basically funding AMD to stay alive, because they would have a monopoly. And now, AMD is bigger than them. But they clearly don’t have the cash to pay its high dividend. But now you look at Nvidia, where the hell did Nvidia come from? How come this wasn’t Intel? Nvidia got hammered last year during the NASDAQ meltdown, falling over 65%. It was $330 at its peak and about one year, it fell to 112. It’s more than 65%. This year it opened up red-hot, like most technology stocks. The stock revved higher, it’s up 35% from its lows. Now going into this quarter, investors are worried because Nvidia is a super crazy expensive stock in a new world where growth has slowed considerably, and most of these tech companies are doing a what? They’re laying off employees.

Frank Curzio: So for the quarter, revenue expected to come in six billion, but this was 20% less they would’ve generated in sales last year. Something that’s not being mentioned. “Oh, they beat the estimate this quarter,” but just, they beat the estimates but revenue down 60%. That’s not a growth stock. That’s not a growth stock. Should they deserve that multiple? So, the stock is running higher, crazy expensive, 60 times forward earnings. So, Nvidia needed to put up a good quarter, and they did. They did, because the 60 times forward earnings, just to compare, the rest of the market trades at 18 times and they’re growing sales on average around three, 4%. NVIDIA’s trading at three times, more than three times that amount, and are seeing sales decline year-over-year by 20%, right? So, they put up good numbers. They reported last night. Earnings came out, I think it was after 5:00 PM which is weird. Usually, the longest they usually wait is like 30 minutes, some tech companies, but usually see them report right away, having numbers ready.

Frank Curzio: I don’t know why it took so long, just surprising. Probably made investors nervous. But earnings came in strong, temps at better than the estimates at 88 cents. They were expecting 80 cents. Sales came in mostly in line, but why is the stock surging of 14% today? NVIDIA provided strong guidance, almost crossed every sector, and also included higher margins. They also got inventory levels of the control, which is a big problem for them. Basically, the gaming sector has bottomed, so they’re expecting strong growth going forward. Expecting strong growth in data centers like within cloud, that’s kind of bottomed as well. See the decline there.

Frank Curzio: And they said, “Hey, now China’s reopened. We’re seeing strong demand.” Saw a huge growth in automotive, expect that to continue. By the way, it’s an $11 billion pipeline. Nvidia has incredible growth potential here, and most importantly the buzzword, right? AI. And these guys are the premium player in AI when it comes to hardware. It’s a strong adoption for its H100 chip, which by the way, I read this, the chip is built with 80 billion transistors. Is that right? Did I read that right? I read that. I had a look at two different sites that said that. Is that right? Anyway, it’s using Taiwan semis 4N processor, but this chip by far is the world’s most advanced. No one’s even close to it and it’s powering the massive adoption of AI. They’re seeing sales of this chip start to explode.

Frank Curzio: So, they reported these good results, while also managing costs and exiting the quarter with 13 billion in cash. I think they bought back about a billion dollars in stock at the right time last quarter. Good job. Most companies buy it back when it’s a lot higher. But that 13 billion can be used to buy back more stock in the future, maybe pay another cash dividend. So, you have tons of excitement around the quarter. So no surprise, the stock is up 14% today. You’re looking from a technical perspective, Nvidia likely to keep running higher, especially since Goldman Sachs upgraded the stock to buy today after these results. And I liked that note, I read that note at Goldman Sachs and said, “Hey, we were wrong. We thought we were going to see a deterioration of fundamentals,” and not many people downgraded Nvidia on a downturn. So, I’ll give Goldman Sachs credit there.

Frank Curzio: And they also said, “Listen, this is our fault. We thought we were going to see a deterioration of fundamentals. We’re not. We’re going to see growth and accelerate.” And usually, when they go through that trough or that period where they bottom, and you seeing that acceleration, this stock usually does very, very well. They admitted, “Hey, you know what? We were willing to be in the sidelines.” However, fundamentally, and this is what you’re not hearing on tv, the stock is trading at 56 times earnings. At 56 times forward earnings, and that includes the revised estimates that almost every analyst adjusted higher today after that quarter, much, much higher. I mean, they lowered estimates incredibly for the quarter where it was kind of an easy beat. But again, Nvidia, it wasn’t about what they reported this quarter, it’s about what they said and how they expect a lot of bottoming out in data centers, gaming, automotive, all this stuff, all the growth going forward. That’s why it’s moving much higher.

Frank Curzio: But at 56 times forward earnings, three times the average stock where it’s trading at S&P 500, the company is priced for perfection. And when I say perfection, this company’s assuming that we’re going to see huge growth in autos. I doubt that. Higher interest rates, tougher to get loans. A lot of these companies are going into EVs. They don’t have the technology and they’re losing money, most of them on every new EV they sell. So, they’re going to have to try to raise prices. Plus, they’re seeing demand fall. That’s why they’re lowering prices.

Frank Curzio: You’re not going to see companies like Ford. They’re going to going to say, “Oh, well, we want to better compete.” They don’t want to a better compete. Nvidia is not lowering their prices to better compete. They have high prices and high margins, because they have the best product. So, don’t listen to the bullshit. “Oh, we want to better compete.” If you have a better product and you’re getting that, you’re going to get as much as you can for your product. And there’s lots of tests, believe me, they test it everywhere. They’re seeing less demand saying, “Oh shit, we got to lower our prices or everyone’s going to continue to buy Teslas.”

Frank Curzio: Nvidia is also assuming that gaming has actually bottomed. I hope they’re right. But I can tell you, I listened to all the earnings. Activision, Take-Two, EA, and Microsoft too, right? Sony. Not one of those companies said that they see gaming bottoming. Not one, and they’re in that industry. Nvidia said they see it though, maybe they’re right. At 56 times earnings, it assumes the insane adoption of AI. You can say, “Wow, AI, great. Huge trend.” I mean, it’s assuming that a lot of this growth’s going to take place over the next 12 months.

Frank Curzio: It’s also assuming that data center, that business has bottomed, right? They’re assuming it’s going to accelerate tremendously, which is that is the big part of their business, which everyone was excited about on the comments that they said. I bet you that’s driving the stock, at least half of that gain higher. But yet most of the major cloud companies, Microsoft, Google, Amazon that I listen to, are not expecting cloud to bottom. They’re seeing slower growth across the board. Every one of them. That’s based on their comments. All of them are saying they’re seeing, they’re predicting a slowdown of cloud.

Frank Curzio: What’s the reason why you’re seeing massive layoffs from most of these large tech companies? So, what the companies are saying and what NVIDIA’s saying is kind of two different things. NVIDIA’s expecting much more growth of these sectors. The companies that operate within these sectors were not that optimistic, and maybe it’s because they can’t be that optimistic and lay off employees and cut costs. I don’t know, but just something to think about. I don’t want to hear that being mentioned, but for me, I just can’t tell you to buy Nvidia here. If you look back when it traded at 330, and that’s why I love, whenever you see that trend that, I always like to look at companies that have gotten smashed, and I want to see why was it trading at 330? What was so great about it?

Frank Curzio: Well, look where we traded at $330. Okay? That was over a year ago, about 18 months ago, 16 months ago. In that quarter they reported, the company generated 7.6 billion in sales and a $1.32 in earnings. That’s at its peak. This quarter it generated six billion in sales and 88 cents in earnings. Again, when it was 330, 7.6 billion. This quarter was a little over 6 billion in sales, a $1.32 in earnings, then 88 cents in earnings today. And that quarter was back in 2021, where rates were near zero, Fed was printing money like crazy, injecting trillions into the system. Tech probably saw its strongest growth in the history of its history. You never saw stronger growth in that. It’s the reason why a lot of these companies, a lot of the majors hit trillion dollar valuations. Do you see these same conditions existing over the next 18 months? Where rates are significantly higher than back then? When Nvidia’s largest customers are laying off employees and seeing slower growth? They said they’re seeing slower growth, which means what? They’re going to spend less.

Frank Curzio: So again, technically for a trade, you can see the stock run another 10 to 15% higher. But when I look and I think of the downside over the next 12 months, I think it could be about 15%, 20% downside, especially if they don’t put up good quarterly results, because now the expectations are sky-high. They were high going in, they’re really, really high now. If they have any setback of another quarter, because now all these companies raised their estimates considerably today. Considerably. They haven’t done that with Meta, they haven’t done that with other stocks. Nvidia, they’ve raised their estimates. Give me a second here and I’ll show you. I mean, this is just Goldman Sachs here I’m going to pull up. I just want to see where they raised their estimates here. They upgraded to buy on growth acceleration, driven by data center and gaming normalization.

Frank Curzio: So, they had their estimate for 2024. Their old estimate was $3.09. So, this is 2024. They’re reporting, I think mid-year 2023. It’s not, it’s fiscal. So, their original estimate before this quarter was $3.09. They raised it to $3.65. That is significant. Okay? Expectations are sky-high. I’m taking those estimates that everyone raised and even with those high estimates, that stock is trading, it’s 60 times forward earnings. And it’s going to trade higher and higher if the stock continues to run here. Think about that if you’re buying it. Because like I said, I think the stock could run 10% higher from here, maybe 15% higher. Do you think it’s going to hit its all-time high again? I can’t see that in this market environment and not going to, the earnings are what? 40, 30% lower, 35% lower than they were? Revenue’s a billion and a half off.

Frank Curzio: I don’t see that. But when I see 10, 15% upside and kind of maybe the same, little bit more downside, I hate that risk-reward profile. And I know I could find at least five other chip companies with a better risk-reward profile than Nvidia. Maybe it’s not exciting, and I know nobody on TV is saying that right now and saying, “Hey, instead of buy Nvidia here, this is what you should buy.” They’re like, “Nvidia is back. It’s back. You got to go crazy.” So, it was up like 6%, 8%, 10%. Now it’s up 14%, right? Whenever you put it on TV, everyone foaming at the mouth. I would say something dirty, but I won’t. They’re just like, “Oh, my God, this is great.” I hate seeing analysts, and one thing I learned over my 30-year career, I hate seeing analysts get emotional and exceptionally happy and excited, especially after a stock is up over 50% in less than two months.

Frank Curzio: We saw that with oil. A lot of great people said, “Oil’s going to a hundred.” And they were right and man, they got much, much more bullish when oil went over a hundred than they were when oil was at 30. I saw it when it come with Northern Dynasty, that I bought at 40 cents. Went there, saw the project, it was amazing. It’ll never get developed because both sides, Republicans and Democrats don’t want the largest undeveloped copper mine to be go into production. It’ll never happen. But at 40 cents, it was worth it. It went to 320. I went to this meeting. I’ll never forget some of the biggest people, several billionaires in this room. I think there was about 40, 50 people having a big party. They all went there. I won’t name some of the guys in that room. And the CEO went up there, who I love, and he was just talked about, everyone was excited.

Frank Curzio: I remember leaning over to Marin’s assistant at the time, so the kid Marin, who I, who I’m friends with, and I said, “I’d be selling this stock right now.” And he’s like, “Why? Get out of here.” I said, I’d never seen someone so excited after the stock went from 40 cents to 320. People tend to get more excited. And right now, the excitement for Nvidia wasn’t three months ago, wasn’t two months ago, wasn’t even yesterday. The excitement is now with this stock up 14, 15% where everyone’s like, “You got to buy, go in, go in.” Be careful. That’s usually a sign that you’re close to a top. And now, Nvidia is a show me stock, where Meta could have reported better results and they kind of did. The results were okay, but the stock went up. Cost-cutting because it was down 60%. I get it. But Nvidia, right now, this stock is priced for perfection. And you may see that.

Frank Curzio: And even if you see that, I just think that the upside isn’t that much for you to buy it here, especially in a market where growth is going to slow. And it’s definitely a different environment when it comes to interest rates, and when it comes to overall spending of tech companies. Because everyone that, all these people that operate in these divisions, they weren’t optimistic. I could tell y’all, I listened to almost all these calls, I’ve read the transcripts, they were not optimistic. Yet Nvidia is like, “Gaming, bottomed. Data center’s bottomed. AI is going to explode much more,” and you might be right on AI and there’s a lot of excitement out there, but still, it’s still going to be relatively small market for now. But just priced for perfection. Again, something you’re not going to hear on TV, I wouldn’t tell you to buy it.

Frank Curzio: I’ll break down some of the other stocks. You’ll see that in Wall Street Unplugged Premium, where I can give you some ideas of stocks I’d rather buy instead of this, to have much, much more upside potential and not as much downside in the risk. I just don’t like the risk reward profile right now from Nvidia.

Frank Curzio: So, guys, excited for next week, launch of Wall Street Unplugged Premium. Hey, you want to find out more information, just go to www.wsuoffer.com. If you have any questions about that product, anything at all, feel free to email me directly at frank@curzioresearch.com. I’ll try to answer all of those emails. Love you guys, I’ll see you next week. Take care.

Announcer: Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money and your responsibility.

Frank Curzio
Frank Curzio, founder and CEO of Curzio Research, is one of America’s most respected stock experts. His research is regularly featured on media outlets like CNBC’s Kudlow Report, The Call, CNN Radio, ABC News, and Fox Business News. His Wall Street Unplugged podcast—ranked the No. 1 “most listened-to” financial podcast on iTunes—has been downloaded over 12 million times.
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