NVDA Results Disappoints! What's Ahead?

Nvidia results yeah so Nvidia you can see here to the m while you see watch it back worst investor and gamblers all pting on the Nvidia second quarter earnings call there was so much attention like all the Reddit forums are social media all very excited about it then even when uh most for investing right I would say for stock picking right like my audience right 90% is male uh 10% is female so for me right hobbies that we have is like watching soccer or football so people they will hang out in the P Watch The Late Night 2 3 a.m. soccer match so inste high these people are at the park but they're not watching soccer you can see the screen is they're watching the earning score of mvidia so Nvidia is now the first talk to have in party iners watch party for earnings result so wow so there good for the beer and the bar business so a lot of these matur man they all long on Nidia so they are all abandoning Tesla already Tesla cannot make it not everyone is buying Nvidia because Nvidia is only going up so Nvidia they release the results most metrics is a big but there's a slight Miss on free cash flow there's a huge Miss on on their profit margins but overall it's a bit but last night post market right it dropped 7% so that came as a surprise but I mentioned that if it means it could crash 20 or 30% so even a bit right it drop oh so so before I came in I see it was down like 3 or 4% the the drop is less uh severe so the results is very good revenues up 122% earnings up 168% so it's actually very good uh set of numbers but why it drop so uh you can see here it deliver an underwhelming forecast and news of the production snack with it much awaited black well chips so blackw CH is the next Generation chips that is more expensive and also faster so they need this to be the next uh engine of growth so but it's now delayed so uh envidia investors have grown a custom to blow out quarters and the latest numbers did not qualify so you can look at the chart here right usually example like you see that the f224 which is three quarters ago oh they actually beat the analyst U estimates by like uh 20 over per and then subsequently they beat by just that 12 133% beat by 10% and this time they only beat by like I think four or 5% so the the bid is less explosive it's just a small bid it's not a super beid of 10 20% Which uh investors are so used to then uh lastly right the next big cash count the new backwell processor has proven more challenging more difficult to manufacture so uh the analy commentatory is that it was up against lowy and unsustainable expectation was just way too high and the forward expectation is that you can see here right Andia their growth rate right in the past right like year over year now it is 122% but the next coming quarter right based on the guidance track is just 79% so it is coming off the triple digit growth rate really you become double digit and this will accelerate downwards eventually you will normalize to a more reasonable like 20 30 % growth rate it cannot grow at triple digit growth rate forever it will normalize eventually even 20 30% growth rate is is still uh very very high so uh the company acknowledged that there were issues reproduction saying that it might take making changes to improve the manufacturing U so this blackw chips right that they Outsource to uh the tsmc to produce right because is a very new very Advanced it's not easy to manufacture so there is uh certain percentage which they never mention how how much percent maybe 20 30% of the production that come out is 40 it cannot be run it has defects and uh cannot be sold because it's so complicated to design so now they're trying to improve on their design so that uh there's a better manufacturing U maybe usually you want at least 90% or a youu that 90% of the chips that you produce is workable so the number of functioning chips that come out of the factories yeah so now that there's this manufacturing problem because the new Chips is so complicated then secondly that the growth rate seems to be coming down already so this is the black ra chip so looks very at very highend I'm not an expert I also don't know how good it really is so they're working with tsmc so uh the management mentioned that the production uh RAM is scheduled to begin in the fourth quarter of of this year and continue into the physical year 26 so in four quarter we expect to ship several billions in BW Revenue so uh investors are worried that this will be delayed if it delay by one quarter it will be a huge impact on the estimates of the revenue and earnings growth and they say that the change to design was complete and there was no functional uh change necessary so uh nothing wrong with that design it's just the manufacturing process that needs to be improved so one thing that is worrisome is that most of nvidia's growth comes from a small group of customer 40% of the revenues comes from companies like alphabert uh meta and also like Amazon which is the big tech companies so the big tech companies make up 40% of their business so you can see that for NVIDIA right uh there are this uh second quarter results right you can see that data center is the huge portion and quarter over quarter it grew 16% uh gaming also go at 9% quarter quarter which is very good but the other portions are actually very small mostly you are actually carried by the data center business which is the Nvidia h100 uh chips so there's been concerned that the amount of infrastructure being put in place assists the current requirements that could lead to a bubble because all these uh Magnificent Seven are that they spend billions of dollars to buy all these andiva chips uh to train their AI but this AI right are they really converting into profits or revenues the answer is no only see that the Microsoft co-pilot which charge $20 us per month subscription making some money is meta making money from Ai No is free of charge to use on the Facebook chat on the WhatsApp then so they're not able to monetize most of this like uh uh uh AI the chatboard is actually free to use uh consumers AR willing to pay money to use all these AI products so basically this all these big Tech they are burning billions of dollar into all these data centers to train the AI will this pay out or not so the big Tech they're asking us to be patient it could take one two or even uh three years but now is that they're spending too much the investors might get impatient they want to see immediate results if there's no revenues being generated uh by these AI businesses then why are you spending so many billions I rather you just pay me as dividends or or you do share by backs with the money so if that is a shift in what investors want then we might see the big Tech right cutting down on their kex capital expenditure in this data center so if what if next year they buy less chips or the year after they buy even much less chips then Nvidia the revenues will fall off a cliff already so you can see that Nvidia right the revenu right the green color one is the data center so it's the one that really carry them second is the gaming but gaming has been stable you can see then the others are not important the one that really is pushing Nvidia to grow is basically the data center you are buying Nvidia for the data center uh chips that they are selling is like 80 over per of their revenues and mostly is the big tech companies like alphab Amazon meta Microsoft and even the Chinese companies 10 cent by two Alibaba they are all rushing to buy the Nvidia chips what if they bought enough what if they they that there's enough Computing already so and then they buy less and things start to slow down there's also a possibility of competitor like AMD or Intel producing chips that are as good as Nvidia chips but at a lower cost then people will buy if if is as fast as much Computing but half the price so in the industry now right there actually trillions of dollars coming into the semiconductor and the cheap design industry to compete against Nvidia because this is such a lucrative such a high margin business give it another two to three years there will be a lot of competitor that can produce chips that are as good and that might be even lower price so Nvidia when they post results was down 6% you can see here the me Stick 50 billion share by back also uh 26 August board of directors approved additional 50 billion of share by backs without aspiration so uh this is good but I don't feel that this share by back is worth because the valuations are so high so basically this share bar is to support the stock price on the flip side management is selling the the entire management team including the founder Jensen hang every day he's selling every week he's selling they have been taking profit so I'm very skeptic I think this is to lessen the blow of the the the dilution because they also give a lot of stock options so in the end Nvidia can buy or not answer is no no it's trading at 58 times earnings 53 Times books 32 time price to sales so among the manif 7 is the most overvalued and I think uh there's too much hype on it can can it be a five trillion company maybe but can it be a 10 trillion company I don't think so is now is the second biggest market cap already uh behind apple apple is like 3.2 trillion I would say so you can can it be the highest market cap company yes you can Sur Apple but can it be 58 or 10 trillion I don't think that that makes economic sense example if it goes to 10 trillion market cap right or even 8 trillion market cap it means that one Nvidia company right the stock market cap is bigger than the entire Hong Kong and China market cap doesn't make sense right now Nvidia Microsoft but plus Apple these three companies 9 trillion market cap right this big tree magnificent right their market cap isig and bigger than the entire Hong Kong and China market cap ready so all the companies listed in Hong Kong and China is smaller than these three us companies so doesn't make sense so it's either there the US part is overvalued or the Hong Kong China part is undervalued and if Nvidia ders or triplers from here then they are bigger than the China market so no logic