Nvidia's (NVDA) Monolithic Task to Maintain Profit

Russell's sliding a little bit but market's just kind of getting their footing ahead of a week. That's got a ton with Nvidia right in the middle is probably the highlight. Ivana Delavska joins us. Founder and CEO of Spear Invest SPR x. Ivana welcome back. Great to see you. Thanks for having me over. Sure thing. All right. So let's talk some numbers here. What are you expecting for Nvidia. What kind of report are we looking at this week? Well, Oliver, we are looking at a pretty strong report from the company. The demand for their current generation Hopper architecture is through the roof. The demand for their next generation Blackwell architecture is as well, very strong. The order book is very strong going into 2025. So we expect very strong earnings from the company for this quarter. What kind of update do you expect? What kind of clarity on the timing for Blackwell and any potential delays? There are obviously reports over the last month and a half that were suggesting they're getting backed up a little bit, some of it of their own doing, having to kind of update designs. Any idea where that stands? So you're spot on Oliver. There were reports earlier this month about potential delays in their Blackwell architecture. However, I would highlight that the delays are really on the system side, and systems are really not supposed to be delivered until middle of next year. So we don't think that will have an impact on immediate results. We are going to be looking for information and data points on those delays, and whether the supply chain constraints have been cleared out, or what the timing would be for them to clear out, because that will be the big driver for numbers going into next year. But for this quarter and the rest of the year, it's all going to be about Hopper and Blackwell chips, not the systems. How much right now do you expect? What's that breakdown kind of generally for this earnings in terms of what's going to come from Hopper versus Blackwell. So the majority for this reported quarter is going to be the majority will be Hopper for their guided quarter. There is going to be some Blackwell in it. And the CEO guided on the prior call that there is going to be there was a question whether there will be any contribution. And he said there will be contribution from it. So we expect that the Blackwell contribution will be how they beat numbers for the next two quarters. Got it. And you expect the demand for that to be like, what, ten x their previous architecture? Am I reading that right? Well that's what their channel checks are indicating right now. So when you look at how the Hopper architecture was building up, the order book in in 2023 and 2024, orders were coming in at ten, 20, 30. Thousands of units for the Blackwell. We are seeing them come in like 100, 200, 300. Thousands of units. So the demand is significantly higher than the previous generation. And each system contains significantly more GPUs. So as those systems come through, that's why they're so important. We believe the systems alone for the Blackwell can deliver over $100 billion in revenues next year. Where would this surprise be then, though? Now, Ivana, from the market's perspective, when we've heard from the big buyers of the hyperscalers, the data centers, the Amazons, Alphabet's ET Cetera that are buying all these chips, we've seen from their earnings and their numbers, what their CapEx is, how does the market get surprised and like, who's the marginal buyer here? Is it still those companies where okay, maybe they actually are targeting even more than we knew or because supposedly like a consumer stock, like when Apple's got a phone, you know, there's millions and billions of people who can buy these things a lot of room for surprise when it comes to these. Like, where could that marginal surprise come from? If we've already seen the CapEx numbers from these big hyperscalers? Well, Oliver, remember, for the hyperscalers, they're using these GPUs and selling them as a service. So the more they spend, the more they have the ability to rent as a service. So the only way they can grow revenues is if they keep growing their CapEx at significant numbers. So it's going to be mainly the hyperscalers. And we saw Microsoft highlight that they actually weren't able to deliver. And beat on their numbers because they didn't have capacity. Similar with snowflake, they said that they were capacity constrained during the quarter. So it's really going to be these hyperscalers and large companies stepping up their order book and actually getting delivered. What they what they had been promised in the books. In terms of growth, do you think valuations can handle the kind of tapering off of the growth rate? Because it's I mean, it's still obviously extraordinary, but we're not going to be getting above Nvidia from two quarters ago. Right. Peak growth. Well what's interesting is that if you look at the valuation on earnings or EBITDA, which is what we look at, the company is actually trading right in the middle of the of the 7 to 10 year valuation range. So we still see the valuation as being pretty attractive here. When the stock hit about 100, that came close to 20 times EV to EBITDA, which we believe is some sort of a floor for the stock. So unless they see earnings downside surprises from there, that is a solid foundation for the stock. And then we don't expect that the upside will come from valuation expansion. We think it's going to come from these earnings beats which we expect to see. Got it. Okay. Ivana while we got you I love the Nvidia stuff. You're also watching Marvell this week Nvidia your top holding and spear x Marvell is kind of tangential but obviously connected like networking centric play. Give me the 62nd take on what to look for here. Absolutely Oliver. So networking is going to be key in terms of delivering performance improvement for the next generation GPUs. So if you look at today, the performance improvement is really coming mainly on the system side. And the key is networking and how the systems are connected together. This is the core of where Marvell plays, and we believe there's going to be they're going to be able to see significant upside, especially as we see more deliveries of new entire system. Thus far, we've only seen basically GPUs plugged into current data centers. But once you see the data center cycle buildout begin, that's going to be a pretty significant benefit for Marvell. And they are also benefiting on the custom chip side. So they're making custom chips for companies like Google Amazon, Microsoft. So that's going to be another lever for the company, which will be more next year. And beyond, as we look through to through next year. All right Yvonne, thanks a lot. Appreciate the setup here. Preview. Great thoughts ahead of the earnings. Thank you very much. Yvonne Delavska, founder and CIO at Spear Invest. Tom White, host of Fast Market. Let's do some trading here. Tom. You got Nvidia and Marvell trades both. Let's go to Nvidia first Nvidia maybe a little bit more aggressive on this one I think going into earnings the option market is pricing in about a plus or -9% move just over $12. Either way expectations of another revenue beat of $2 billion I think the whisper number is about 30 billion. After the company got it for 28 billion. But this is going to be a big earnings report. Implied volatility levels elevated going into the report after the close on Wednesday. So I looked at a call diagonal in here. If you think the stock's going to move higher post earnings I looked at a short dated one where I went out to the September monthly cycle. So 25 days to expiration. And I bought the 129 strike call. That's basically at the money here. And then against that in the near term, August 30th, weekly options that expire in just four days, I sold the 140 call. So a bullish $11 wide call diagonal to the upside. And I'm paying a debit of only seven bucks. So why am I paying less than the width of this call diagonal? Well, implied volatility levels. I'm basically buying out in the September monthly cycle on the 129 strike call. I'm buying about a 78% implied volatility on aggregate in that option series. And then in the near term options on the August 30th, where I'm selling the 140 strike call, about 130% implied volatility level on aggregate. So there's that disparity between the two implied volatility levels takes advantage of a move higher. You'll have that ability to roll that short 140 strike call repeatedly collecting more credits increasing potential profitability. This might be the way to play it just because of that dispersion between IV levels. So it gives you a way also to kind of like withstand near-term weakness in Nvidia, but ultimately a bullish view that it will find, you know, momentum again, because given the calendar part of it and the fact that selling the 140 and right after the earnings, yeah, it's got vertical components. It's got calendar components where you've got a time spread built in there. But even if that short 140 strike, if it doesn't go down there, maybe it goes a little bit lower. But then that that short 140 strike goes out worthless. And you can sell another call against it so you can manage this position even if the stock does fall a little bit. But you're paying a lot less than the width of the $11 wide bullish call diagonal. Got it. All right. So short term basically you know if it rips to like a high then the on the 140 you sold obviously is not going to go perfectly. But then you've got you know you're covered. Yeah. Because you're along that 129 strike call. So it's going to be all profitability about above that one 3131 level. Okay And then if it does make that move, if it does kind of it's not really against you obviously. But if it does make that sharp early move, what do you do with the trade. Well that's when you start rolling that short option. If it gets close or at or near that 140 strike, because that's the optimal time to roll, is when the stock's trading at or near your short strike. That's when you can collect more credits right. Yeah. Time decay or theta works in is positive works in your favor in this type of strategy. And then you'll see that big massive vol crush post earnings which will affect that short call on the 140 strike. Also allowing you to buy it back cheaper, rolling it out to the same strike or a different strike on the next weekly series? Fair enough. True. So the Vol crush, probably the likely vol crush that you can basically count on. It means that you're going to have to even get a bigger move through the strike, right? Because it's going to have to have like a huge move, not really not not when you think about that, because you're buying the 129 strike call that's got implied volatility levels, too. And because it's longer dated, Vega, the Vega component is affected more by smaller moves in implied volatility. So the idea is you want it to go up or near at or near 140. But if it goes above there, you're still going to be profitable. If it goes a little bit below there, you're still going to get some value. You're not you're not going to be upset. Yeah. All right. Obviously like a big, big crash would stink. That would not be good for this position. Yeah. But then you've got duration in it too because like I said, you can let that short 140 strike go out worthless and then look for another way to adjust this spread. Nice. I like it all right, hit me real quick. Marvell. What? You got a little bit more conservative neutral to bullish on this one. Okay. They report Thursday after the close option market price in a plus or -10% move. So I looked at just selling an out of the money put vertical out in the September 20th monthly cycle 25 days to expiration. Sell the six eight strike. Put and buy the 65 strike. Put $3 wide short neutral to bullish, collecting roughly about a dollar credit. That's what you can make on it. You got 200 bucks in risk, but your break evens all the way down. At 67. That's about 6% below the current share price. So you're giving yourself that cushion to the downside. You're getting yourself better probabilities of success. You profit in three out of four scenarios on this one. Stock goes higher, remains where it is or goes lower, but remains above 67. This one's profitable. All right. Okay, straightforward there. Yeah. All right. Thanks, Tom. Appreciate it. Okay. Two different ways to approach two different semiconducto