The QQQ pull-back has reached 3.4% which is exactly in-line with the historical trend. But with Nvidia reporting earnings today, the overall trend is at risk.
Excellent commentary. My own investment philosophy, that has evolved over the past 40 years (and which I’d call “Dominant Player in an Expanding Niche”), is long term and appears to closely resemble yours.
WT
August 28, 2024 11:57 pm
What do you think about NVDA’s decreasing gross margin though?
It’s a non-issue. Remember, very minor things like a small percentage decrease in gross margins doesn’t have a long-term impact on the fundamentals. It’s a new-term FUD news item that the financial press and bears can use as ammunition. Now if GM were to absolutely deteriorate, that’s a different issue. But we’re talking a few percentage points on a high to mid-70% in gross margins. Remember, gross margins were up year over year.
Not an issue at the moment. Certainly not a large enough of an issue to have any bearing on the stock long-term.
Kiran Kumar
August 29, 2024 12:32 am
Thank you!
Ryan
August 29, 2024 1:16 am
Won’t the Asian markets pull NVDA down further tonight?
Marvin Esch
August 29, 2024 7:08 am
What do you think about the slowing of growth rate quarter to quarter?
Isn’t that the bull thesis of NVDAs lofty valuation, which shows signs of declining?
I think what will be more important is that Nvidia continues to meet its analyst targets. It’s okay for top-line growth to slow down. Analyst expectations this year are for revenues to grow at around 120% year over year. But for 2026, the consensus estimates call for revenues to slow to only 38% top-line growth.
As long as Nvidia continues to report just above analyst estimates, it will continue to grind higher and likely meet analyst price-targets. I don’t think anyone expect Nvidia to grow its revenues by 100% every year. That’s going to eventually slow as you get to much higher revenue numbers.
These ideas that Nvidia will somehow achieve a $10-15 trillion market cap is fantasy land stuff.
Jovani Delgado
August 29, 2024 3:32 pm
i have 130 calls expiring September 6th and 13th this year. Im kind of getting nervous, what do you think the chance is of me escaping with at least some profit. I bought them mid/early august.
So that’s the big issue right there. The short-term stuff like that carries an incredibly high risk of loss specifically because it is extremely difficult to forecast such near-term price moves with any high degree of certainty. So the risk is extremely high. Any number of things can derail the rally between now and September.
What’s more, as you just witnessed, earnings is a huge crap shoot. Look at how the market is trading today. If you told me a week ago that nvidia would deliver the numbers it did, I would have probably guessed higher after earnings. I certainly would never have predicted market up big with nvidia down a few percentage points after earnings.
I’d say take this as a lesson to avoid trading such short-term options. You can achieve similar results by compounding your gains in the long term. For example, a 25% gain might not seem like much. But if you compound 25% a few times, you’re going to see some really big numbers. Play that out 5x. $100 > $125 > $156 > $200 > $250 > $315. Five conservative option trades yielding 25% gives you a total yield of 200%. Continue that further along and you start seeing a doubling of your capital on each 25% trade.
The point is to make very high probability investments that give you a smaller yields far more consistently. That’s how you develop the larger percentage gains. Whereas with near-term options, you’re just rolling the dice in all honesty.
With options expiring a week away, there’s maybe a small amount of hope. We have seen stocks do what nvidia is doing right now and then quickly just reverse course. We’ve seen that happen before plenty.
The QQQ is looking like it’s setting up to breakout. There are some things do bother me a little about the chart. I’ll be talking about that today shortly. But it’s very positive that the NASDAQ-100 is trading higher today even with NVDA trading lower as it is. I think that that may indicate is that the market is not concerned at all about Nvidia’s earnings at all.
So even though the stock isn’t reacting positively to the report, the market views the report as perfectly acceptable. Otherwise, the entire NASDAQ-100 would be trading lower right now.
But I do think forecasting out to next Friday and the ensuing Friday is a huge crap shoot. It’s why I don’t play earnings and why we’re all about 2-year time horizons when buying. When you buy, you should do so with the expectation that you may have to hold that position for 2-years. That’s the idea here. That won’t curb returns at all. But it will give your investments a lot of protection against market related risks and uncertainties.
By
/ August 28, 2024 
Thank you sir 🙂
Crisp and to the point, love to follow you 🙂
Excellent commentary. My own investment philosophy, that has evolved over the past 40 years (and which I’d call “Dominant Player in an Expanding Niche”), is long term and appears to closely resemble yours.
What do you think about NVDA’s decreasing gross margin though?
It’s a non-issue. Remember, very minor things like a small percentage decrease in gross margins doesn’t have a long-term impact on the fundamentals. It’s a new-term FUD news item that the financial press and bears can use as ammunition. Now if GM were to absolutely deteriorate, that’s a different issue. But we’re talking a few percentage points on a high to mid-70% in gross margins. Remember, gross margins were up year over year.
Not an issue at the moment. Certainly not a large enough of an issue to have any bearing on the stock long-term.
Thank you!
Won’t the Asian markets pull NVDA down further tonight?
What do you think about the slowing of growth rate quarter to quarter?
Isn’t that the bull thesis of NVDAs lofty valuation, which shows signs of declining?
I think what will be more important is that Nvidia continues to meet its analyst targets. It’s okay for top-line growth to slow down. Analyst expectations this year are for revenues to grow at around 120% year over year. But for 2026, the consensus estimates call for revenues to slow to only 38% top-line growth.
As long as Nvidia continues to report just above analyst estimates, it will continue to grind higher and likely meet analyst price-targets. I don’t think anyone expect Nvidia to grow its revenues by 100% every year. That’s going to eventually slow as you get to much higher revenue numbers.
These ideas that Nvidia will somehow achieve a $10-15 trillion market cap is fantasy land stuff.
i have 130 calls expiring September 6th and 13th this year. Im kind of getting nervous, what do you think the chance is of me escaping with at least some profit. I bought them mid/early august.
So that’s the big issue right there. The short-term stuff like that carries an incredibly high risk of loss specifically because it is extremely difficult to forecast such near-term price moves with any high degree of certainty. So the risk is extremely high. Any number of things can derail the rally between now and September.
What’s more, as you just witnessed, earnings is a huge crap shoot. Look at how the market is trading today. If you told me a week ago that nvidia would deliver the numbers it did, I would have probably guessed higher after earnings. I certainly would never have predicted market up big with nvidia down a few percentage points after earnings.
I’d say take this as a lesson to avoid trading such short-term options. You can achieve similar results by compounding your gains in the long term. For example, a 25% gain might not seem like much. But if you compound 25% a few times, you’re going to see some really big numbers. Play that out 5x. $100 > $125 > $156 > $200 > $250 > $315. Five conservative option trades yielding 25% gives you a total yield of 200%. Continue that further along and you start seeing a doubling of your capital on each 25% trade.
The point is to make very high probability investments that give you a smaller yields far more consistently. That’s how you develop the larger percentage gains. Whereas with near-term options, you’re just rolling the dice in all honesty.
With options expiring a week away, there’s maybe a small amount of hope. We have seen stocks do what nvidia is doing right now and then quickly just reverse course. We’ve seen that happen before plenty.
The QQQ is looking like it’s setting up to breakout. There are some things do bother me a little about the chart. I’ll be talking about that today shortly. But it’s very positive that the NASDAQ-100 is trading higher today even with NVDA trading lower as it is. I think that that may indicate is that the market is not concerned at all about Nvidia’s earnings at all.
So even though the stock isn’t reacting positively to the report, the market views the report as perfectly acceptable. Otherwise, the entire NASDAQ-100 would be trading lower right now.
But I do think forecasting out to next Friday and the ensuing Friday is a huge crap shoot. It’s why I don’t play earnings and why we’re all about 2-year time horizons when buying. When you buy, you should do so with the expectation that you may have to hold that position for 2-years. That’s the idea here. That won’t curb returns at all. But it will give your investments a lot of protection against market related risks and uncertainties.