Nvidia shares slide despite earnings beat

the CNBC app global market news in one place customizable sections and personalized alerts stocks tracking interactive charts and Market insights all in your hands stay connected stay informed download the CNBC app today a very warm welcome to squat boox these are your headlines right let's get straight into Nvidia it drops an extended trade despite topping lofty earnings expectations this is the AI chip makers current quarter forecast well apparently it underwhelmed some on the street we'll discuss after the diso disappointment seeming to uh well seeping into other chip makers Qualcomm AMD broadcom all falling after hours whilst Asian chip stocks also come under pressure but the Nvidia CEO Jensen hang still sounds a bullish note on the call the data center worldwide are in full scene to modernize the entire Computing stack with accelerated Computing and generative AI Hopper demand remains strong and the anticipation for black wall is incredible CNBC learns open Ai and talks for a fresh round of funding that would value the artificial intelligence startup at more than $100 billion and Burkshire hathway tops $1 trillion in market cap with the Warren Buffett lead firm becoming the first US Stock outside of the tech sector to hit the milestone [Music] there's nothing better than watching a community of investment analysts and then journalists trying to understand something they don't understand and it is wonderful to watch as you know this ladies and gentlemen the numbers at Nvidia were fantastic they topped expectations but for some reason the market fell aggressively so so everybody's now running around trying to say oh well it wasn't as good as as X or wasn't as good as the top end the fact of the matter is these Nvidia numbers are still intact they were still knockout numbers now is there a whisper number in the market of course there is there's always a whisper number in the market but what you've got to remember everybody out there is the numbers are very often just a catalyst to other events I.E people have positioning they have positions on so they were always going to do something with those positions after the numbers plus we've had a journey look at where we've come on Nvidia they have had the most meteoric rally so far this year what was it 160% coming into numbers so if some people weren't going to take profits regardless then it would be nonsensical to suggest you've got positioning you've got whisper numbers you've also got algorithms out there acting on these numbers as well so there's a whole host of factors that the journalists and investment Community just can't get their fingers on the truth of the matter is these were good numbers now the shares are lower in extended trade after a top and bottom line beat in the second quarter the midpoint of current quarter Revenue guidance came in 2% above the analyst forecast but apparently failed to meet some of the most ambitious buy side expectations well the chip maker said it expects to ship quote several billion dollars in revenue from its new black whale chips that was of course the concern but that's going to be done in the fourth quarter despite reports of production delays so they they' kind of hit that metric as well uh the CEO Jensen hang looked to dismiss concerns that the upcoming new generation of chips would hit demand from its current Hopper products if you have a choice between building CPU infrastructure right now for business or Hopper uh infrastructure for business right now that decision is relatively clear and so I think people are just clamoring uh to uh transition the trillion dollars of uh uh established installed infrastructure to a modern infrastructure in Hopper state of the art we all to spend a lot of time on Nvidia and we make no apologies for doing so that's why we've even got arjan out of bed early from his Essex Mansion good morning you sir how are you very well well I've had my five PS where I think very often it just is what it is because of how the market is placed uh regardless of the actual numbers but you tell us more about the actual numbers and what do you think about the reception you know I I think I agree with everything you said there as well there is also stop whis number but there is also that whisper number look people the reality is the growth cannot continue at the rates we've seen over the past few quarters that's just a reality the the comparisons quarter or year onye are getting harder but still like 122% Revenue growth year-over-year in the quarter but it wasn't the 200% we've been seeing over the past few quarters the guide as well was under triple digits growth as well there's a bit of that one other thing I'll add to the mix was one of the interesting things we saw when sort of this boom was taking off is that the sort of valuation in terms of a Ford P basis didn't really move much even as this stock was on this meteoric rise because Nvidia kept guiding up and guiding up and that's the other thing they are growing into that valuation absolutely but now you are seeing that sort of forward piece start to tick up a bit so there are potentially some valuation concerns as well here on this but look quite frankly this is a very volatile stock it's a bit like Tesla as well at the moment there's a lot of retail inv but the forward PE for the next 12 months is only 36 times isn't it well that's that's that's half what Tesla's trading at y it is it is yeah it's not the most demanding forward P ever seen not all yeah not at all but it's it's it's sort of slowly starting give us one more point and then we'll move on because we' got a guess waiting in the wings as well well I I'll just say this I mean the the the fundamentals remained strong uh the demand picture was was what was in question are the big tech companies still continue to buy and the answer is yes not only the current generation of Hopper chips but certainly for Blackwell as well and it looked like Nvidia dismiss those concerns that there was any kind of major production delay to him all right super dup as I said we've got a guest coming out so let's just just round the the circle on this one as well uh Asia chip please let's have a look at where they are currently trading as well again declines across the sector in Asia uh thanks that team 2.9% down for Samsung Electronics tsmc the biggest Fab on the planet the key fab on the planet 1.8% easier and the US chips after hours I mentioned broadcom in the headlines as well let's have a look they were down 3 9% right okay another view on this Alex Morris CEO at FM Investments Alex always a pleasure seeing you we always learn something as well you've heard from me you've heard from ajan we need to hear from you sir what do you think you know I I I think I agree with both of you which is I guess good news but bad news in the sense that it's just really hard to make out what the market really at least the after hours Market which is admittedly not the full you know brunt and thrust of a full day's trading even though it'll be a slow slow week uh given where we are in August of what numbers were really spectacularly good look making a billion dollars in a quarter is pretty hard making a billion dollars on top of the 19 they already expected of you is really just dramatically good but it is interesting to the point about the whisper number and positioning we did end about where the options Market sort of expected us to be so you do wonder if some of the fix was already sort of in from a trading perspective well in advance of what was a a relatively humble Victory lap that the CEO took this afternoon yeah I mean so ultimately Alex and you know one could say then that Nvidia was a victim of its own success right I mean if I was to take away the name of the stock and I said to you there's a company that grew Revenue 122% year-over-year has risen 150% uh in share price year today trades that around 36 uh Ford multiple there still expects increased demand for its product with a large part of capex of the biggest companies in the world still going to that company surely you still get into this company you wouldn't have drawn down the 2% you saw pre-market uh or in the market and the 6% afterwards surely no absolutely not and and I think analysts in general agree almost no one has this at a sell few have this at a hold almost everyone has this at a buy or an outperformer strong buy and the numbers that they saw today are just not materially going to change that you know it's unfortunate that we look at it and say well Revenue growth year onye you know looking on a quarterly basis is half of what it was before but it was 250% before you couldn't keep that up even in a small cap stock that was you know trading at just a few million dollars of Revenue much less the large one of the largest two companies in the world where if they kept on that pace for a few years they'd have more money than just about we have money to give them and that would be you know obviously impossible and a real problem Alex was there anything sort of in the report that that was concerning at all you know obviously there's a lot being read into will the the black whe chips be here will they not and you know there just wasn't enough information to say yes or or no I think the the the hard part is there wasn't anything really great or bad about the report the numbers were great and the report and and the the conference call seemed to really just support that it's business as usual over here we're just continuing to keep on crushing it and the market seemed to say well that's just not good enough for us which you know if you can't win for winning sake then you know you wonder when do you just stop playing the game I uh just looking I think slightly more forward you there's been a lot made about the increased competition for NVIDIA from the likes of AMD who are sort of starting out their journey into this space as well um how big a a challenge uh does Nvidia have from any kind of Rivals at this point or even over sort of the coming year or so you know it has some but it has say three4 to 80% thei chip market right it it's the market in that sense it's in its own way its own economic indicator you know becoming as important as the GDP stats that we're going to get on tomorrow so it has Rivals and those Rivals will kick on but it has such an installed benefit and base of where they are it's going to take years even if all of its competitors got together to try to put together a few interesting products that I think they have a moat for at least two or three years before they have to seriously consider the impact of that competitor base would you would would you be worried in Alex if uh perhaps some of the hyperscalers which which according to Jensen make up around 45% of of of nvidia's Revenue were to slow their spending would that then become the key factor to worry about then for nvidia's growth yeah and there's probably only four or five companies that matter in that sense right and those are the other largest companies of the MA 7 who are a substantial percentage you know their capex goes to Nvidia and they are substantial percentage of the growth of nvidia's Revenue over the last 6 eight quarters so if those companies were all of a sudden to scale down they'd have to do so quickly but it could happen the problem would be they wouldn't put all of their bets into one other company they'd start to spread themselves naturally and that's where as a Trader you know diversification would help uh as a market participant but it seems unlikely for that to happen right now if only from a herd mentality one of those companies is afraid to move therefore they're all going to stay where they are so they all rise and fall together which seems to be an invidious favor in the moment and likely continue to be so for the at least the next year if not two Alex let me do that disclosure thing before we go any further you own this stock does your family own it does your company own it just give us your disclosures uh I own it through uh the fund uh that our company runs the company does own it in a handful of our portfolios perfect just done that we have to get that bit over and done with okay now look um in terms of the valuation arj and I had a little bit of a back and forth on this one as well am I wrong in saying it doesn't look that on a pure PE basis there's many ways to value company it doesn't look anywhere near as demanding as some other boom tech stocks out there namely the likes of Tesla for instance but but I don't think 30 Old Times forward for one year forward PE looks that demanding no it's relatively cheap if we'd be allowed to use that term and if we were to start to go back and look at some of the other bubble times which inevitably we're going to hear a lot about today and tomorrow it's still cheap by those standards and it's cheap given how rapidly it's grown I mean this is a company split adjusted four years ago was still was trading at $10 right if you were to have held this thing in your portfolio for the last decade you're up measured in the thousands of percent Total return which you'd expect a company with those stats to be trading triple digit PE you know maybe higher starting to Plum that level and it's just not it has both the revenue and the earnings to back up its gross story and it continues to do so let me move Beyond Nvidia but talk about the inspiration from Nvidia Alex because I I have a theory that I don't understand why everything goes up or down on the back of Nvidia to my mind Nvidia and again this is not a novel thought but Nvidia is picks and shovels Nvidia is making vast quantities of money out of the Mania that is AI chat GPT etc etc but the others out there who are moving up and down on the back of Nvidia have failed to prove that it's more than a cost at the moment in many cases in fact they it's just a revenue line so a big Parton a cost line rather than a revenue and a profit line as well why isn't there an inverse relationship with Nvidia rather than a relationship which feeds on the back of it and has a multiple um kind of move for other stocks exacerbated by Nvidia rather than moving in the opposite direction no I think there's a certain convenience to it uh if not laziness easing to look at what Nvidia is doing and say the demand that it is seeing from all of those other companies is indicative of them producing future results so if they have continued demand they will produce future results therefore let's just look at the demand indicator through Nvidia and asso almost everything else because it's easy and historically it's kind of worked and as long as it still kind of works and everyone puts such large percentage of their capex there it is a pretty reasonable you know bullish indicator of where those companies think they'll be now the test will come say two or three qu from now when those companies have to show results for the cash flow they've handed over to Nvidia historically the where they've spent their capex has been a good indicator of where they will be successful so we're we're relying on that correlation standing up today and there's no real evidence that that's going to change so you know that's that weird combination of convenience and history and we just don't know so why not just pick this thing so we'll all agree to it and once there was enough Capital behind it it became powerful enough that you couldn't ignore it as that indicator I I love that your lazy line I agree entirely and I love the fact that you've written in your notes as well the word shth as well it should be in every read Alex here's a lazy question but everyone's asking it so I'm going to ask you as well what is bigger for the market Nvidia or actually the nonfarm payrolls you know right now it's Nvidia and that's something that's hard to say as someone who's followed rates and all the other major statistics for long time but if you looked at what's going to move markets and more actual market share you know for the next few hours it's Nvidia longer term obviously non-farm payrolls GDP the other things we're going to see are going to be much bigger you know you almost wonder were more people tuning in to watch Nvidia and I think the answer is yes then JP from Jackson Hole and that's just something that's an athema to most of us but you know we're we are following the markets so we have to follow where the dollars are going so we can help folks figure out where they need to be and right now that's what Nvidia is up to good man Mr Morris thank you very much for your time much appreciated you being up in Washington it's time for us well love the conversation Alex Morris the CEO of FM Investments and I should thank you as well for leading us off in that conversation very interesting point about more watched have you heard people organizing viewing parties to watch Yensen hang and his on his earning school and things like this really I've read this today so the only people I I'd imagine that uh um that this has happened at um with with Buffett I'd imagine when he speaks yeah um SoftBank I'd imagine bank here probably I can't imagine anyone else would have that influence I mean who else would it Buffett sof not Gat maybe Steve Jobs back in the day potentially we've got the did met not matter as much as well just a little bit early on we listen he listen once existed in 2012 I think it mattered after the mar people having Zuckerberg parties are you serious I I I I certainly didn't never know I watched the movie enjoyed that I don't think he did I'll catch you later uh right let us let's stay in a sector actually open AI how about this one open AI is in talks over a funding round that would value the AI startup wait for it drum roll at over hundred billion do CNBC has learned Now One Source with knowledge of the matter told CNBC the round would be led by VC firm Thrive capital which would invest1 billion dollar The Wall Street Journal has reported that Microsoft which is open ai's biggest backer will also participate in the round open Ai and Microsoft declined to comment do you want a word on this one or not really interesting you know it's one it's one of one word wasn't quite shiv was it or Ana that we had from Alex but interesting well look open AI needs a lot of money right to continue buying these Nvidia processes as well and and and investing in its product and also um in terms of monetizing AI this is where Microsoft really sees um its ability to do so through some of these open hour products through its products and charging customers for it and you know it's saying already in its earnings that it's seeing some return from AI in its Cloud business but where a lot of these so-called hyperscalers these microsofts Amazon and Googles in the world are going to see the return is likely in the cloud business before anything else got it but there you go that's better than interest much we just need to give you a few more words comment was interesting you said one not uh you can check out all the details on cnbc.com what else is coming up on the show Arab well we're going to have more of that reaction to invid why don't we those results then of course sweeping through financial markets will continue to unpack the impact uh of what the AI bellweather is telling us about the sector plus authorities in France formerly charged telegram founder paval durov that's for allowing quote criminal activity we'll discuss what his detention means for Content moderation across the block and risks of a nuclear accident in Russia Rises that's according to the Ia we'll talk through the threats with the organization's director General that's coming up a little bit later on 9:30 [Music] C CNBC connect is back in Bangkok Thailand join the world's top entrepreneurs and sea Suite Executives for an invite only leadership Retreat on the agenda hiring Innovation and growth in Asia is AI transforming Industries and creating opportunities and get insights on building sustainable and resilient businesses be part of managing Asia live Network and join an interactive brainstorm session CNBC connect empowering Innovation and growth in Asia on September 4th register now [Music] sometimes these things are very well done other times it's just like uh Steve picks up perer rard okay there you go I am picking up with per fully net sales over at per I knew exactly what was going on always do uh 11.6 billion euros organic decline though and this continues that luxury stroke Alco premium alcohol Trend that we've seen over at diio and elsewhere an organic decline of 1 to 2% look at the shares they so my question for you viewers is is this new news or actually is alreadying the price because of what we've already heard from diio and other luxury players such as uh Louis vuon MO Hennessy of course the mo Hennessy bit on the the premium alcohol um end of the spectrum so a decline of one to 2% uh according to the uh compared with the the company consensus F year profit from recurring operations 3.12 billion euros organic growth there of 1.5% versus uh .1 1% I I should say that the the organic decline the sales revenue was virtually in line mildly by decimal bed in expectations as well what else are they saying um the divy proposed for 44.7 per share uh 2025 they expect organic net sales back to growth with continued volume recovery and to sustain organic operating margins so you can sell anything you want at the wrong price but you've got to sustain your margins if you want profitable growth as well and that's what they're talking about there continued now this is really interesting continued very weak macro context in China now we've seen a whole host of numbers a whole host of numbers whether it's from the iron or players or whether it's on consumer facing companies such as uh pind Doo we talked about earlier this week as well which is saying continued macro weakness in China uh but the good performance the rest of the world so it's still that blood on the horizon and why is China important well very obvious for many reasons but it was The X Factor to the upside for many of these companies for decades certainly for the first 20 years of this Century as well so continued very weak macro context in China obviously we have to dig into the weeds to see if there's any forming of a base there but they expect uh for the full year 2025 soft first quarter so it's a bit of a a jam tomorrow story or or a pericard tomorrow story with further inventory adjustments in the US that's not good either further inventory adjustments in the US as I say the shares have had a drubbing mostly in the last 12 months as well but look at this compared to the rivals brilliant chart to show team as well they have mirrored the rivals to the downside we've already had the bad news from Dio and others as well so my question is when we get to the open today in an hour and 35 minutes is this new news or is it a continuation of the trend which has already led to these declines again hard to work out in advance as well because there's a lot of positioning out there on this one you got any words of wisdom yeah so it's again you you started off with this and it's that premiumization conversation that we kept on having right and and I I know I point a lot more to diio just because we we speak to the CEO of that one as well quite a lot and and really the conversations have always been about buying Brands if you haven't made them yourself organically is about buying the kind of brands that will lead to the growth of premiumization but that hasn't worked out the way that these uh you know the these uh drinks makers would have actually liked and so now it's about or it looks like it's about trying to go back to basics to try and find where exactly can you meet the consumer you can't meet the consumer where you thought they were which is that premiumization step where they would then then buy that premium brand but perhaps not as many of them as they wanted to now perhaps buying less and fewer and maybe not necessarily the premium brand as it were I think the conversations are very interesting as to whether we'll get that uh in future that's a very good point actually they've put a lot of money into that and they either double down or they trying to look for other strategies I would guess they're going to double down at this stage yeah will be interesting to see well let's focus in on what would be an early birthday present then for Warren Buffett cuz Burkshire Hathway's market cap cross the 1 trillion dollar Mark for the first time yesterday now the first US non-technology company to do so this even after Burkshire Hathaway announced that it had offloaded tens of billions of dollars worth of stock so far this year that's primarily in its two biggest Holdings that's apple as well as Bank of America now its cash pile now sits at a record $277 billion now since Buffett took charge of Burkshire in 1965 its shares have risen by5 Milli 600,000 per. that averages out to around 20% annually Buffet turns 94 tomorrow wow good for him uh meanwhile crowd strike is moving lower after its first earnings report since it reported that huge it outage that impacted workers around the world in July now second quarter earnings beat by 7 cents after excluding the 2cent hit from the outage the company though did cut its revenue and earnings forecast for the year with subscription revenues expected to see a $60 million hit for the duration of the year as it tries to deliver incentives to customers thank you for listening to squat boox Europe Express for more Market moving news you can head to C nbc.com or join us again on the show with Steve Cedric Karen Cho and myself Arab weekdays on CNBC