Nvidia earnings, electrification boom, and bubbles Nvidia earnings, electrification boom, and bubbles Nvidia earnings, electrification boom, and bubbles

Nvidia earnings, electrification boom, and bubbles

Equities 5 minutes to read
Peter Garnry

Head of Equity Strategy

Key points

  • Nvidia earnings: Nvidia shares were up 9% yesterday as its revenue outlook for the current quarter was much stronger than expected.

  • Electrification boom: The boom in AI is creating a major shift in demand for electricity and grid infrastructure. We highlight the major US and European companies in grid technology.

  • US equities bubble: Last week’s all-time high has pushed US equities back into bubble territory.

  • Earnings watch: Next week’s most interesting earnings releases are Salesforce (Tue), Costco (Thu), and Dell Technologies (Thu)

Nvidia defies gravity on strong AI demand

Sometimes a picture says more than a thousand words and that is exactly what yesterday’s performance heat map of S&P 500 stocks did (see below). In a sea of red as US stocks reacted negatively to strong PMI figures, which lowers the probability of a rate cuts, Nvidia shares pulled in the opposite direction gaining 9.3%.

Nvidia rose strongly yesterday as its earnings results published after the US market close on Wednesday showed a strong beat on both revenue and earnings. Revenue was up 262% YoY and EPS was up 585% YoY. But it was its revenue outlook for the current quarter of $28bn plus or minus 2% that beat estimates of $26.8bn that really got investors excited. The excitement continued on the earnings call when the founder and CEO Jensen painted a wild picture of the future with Nvidia powering it all. As the slide below shows, Nvidia has significantly pushed the computing power to new levels and Jensen said more was to expected and that it would drive significant innovation in self-driving cars technology and drug discovery (Nvidia is building a supercomputer for that purpose with Novo) just mention a few things.

Ahead of Nvidia’s earnings we published the first in our new weekly series where we every Wednesday covers a high quality company. Read the fascinating story behind Nvidia and how it became a high quality company, but importantly whether it can remain a high quality company in the future as Google, Meta, and Microsoft are collaborating to break down the competitive walls protecting Nvidia’s business.

Source: finviz.com
Source: Nvidia
Nvidia share price | Source: Saxo

Electrification is the next wave

The two big themes this year have big defence and AI. All waves end at some point and a new one will come. We believe that the next wave in investment themes will be electrification due to the massive demand for datacentres filled with GPUs to train AI models and compute inferences from these models. Bloomberg recently did a podcast with Brian Janous, the former Head of Energy at Microsoft, in which he explains that electric utilities have gone in one year from projecting zero growth in electricity demand over the next 10 years to a doubling. The message is that this increase in electricity production will create a big investment boom in new power plants and renewable energy projects, but also buildout of new electricity grid infrastructure. From an investment angle our view is that grid technology is the sweet spot.

The biggest players in the US and European grid technology industry (power lines and transformer stations etc.) are GE Vernova, Siemens Energy, ABB, Schneider Electric, Eaton, Nexans, and Prysmian. As the chart shows below, the total return for these companies has been quite good over the past five years and the AI boom has extended the momentum even more. This year these stocks excluding GE Vernova that was IPO’ed in April are up 31.2% on an equal-weighted basis beating the MSCI World by a big margin. One could argue that the electricity grid theme is already running, but in the minds of investors and in terms of media headlines it has not rose to attention yet. For investors that want to diversify their portfolio’s exposure to AI considering these companies in electricity grid technology might be a good idea. 

Has AI created a new bubble?

When we look across last week’s performance we can see that the information technology sector is the only sector that is up while interest rate sensitive sectors such as consumer discretionary, utilities, and real estate have been under pressure. Across regions things have been muted, but as we highlighted in last week’s equity update, US equities are back to all-time highs and it begs the question of whether we have a bubble again.

Looking at our valuation model on US equities there are signs that US equities are getting too expensive again and that investors should consider reducing exposure to US equities. In last week’s update we flagged European equities as the most interesting alternative right now to US equities and that is still the case. Based on our valuation chart we can say that we have had three bubbles in US equities since 1992. The first came during the 2000 dot-com period, the second was the technology bubble during the pandemic reopening in 2021, and now this AI fuelled bubble with Nvidia shares spearheading the move.

Earnings Watch: Salesforce, Costco, and Dell Technologies

Next week’s key earnings to watch starts on Tuesday with Salesforce reporting FY25 Q1 earnings (ending 30 April). Analysts expect 11% YoY growth and EBITDA of $3.8bn up from $2.8bn a year ago as Salesforce continues to focus on improving profitability. Investors will also focus what Salesforce is doing to implement AI workloads on their Salesforce platform. Costco reports FY24 Q3 earnings (ending 31 May) on Thursday with analysts expecting revenue and EPS growth of 8% YoY as Costco continues to take market share in the US retailing industry due to its strategic positioning on high value which fits well in an inflationary environment. Dell Technologies reports FY25 Q1 results (ending 30 April) on Thursday with analysts expecting revenue growth of 3.5% YoY and flat operating profit growth. Dell Technologies has been one of the big winners since ChatGPT was launched in late 2022 as the market has repriced the company’s shares, but it remains to be seen whether its partnership with Nvidia on AI and demand for AI workloads are filtering through to Dell’s business.

Previous weekly equity market updates

New all-time high on speculative stocks comeback


The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.