Closing Bell - Closing Bell Overtime: Breaking Down Nvidia Earnings, Impact On The Market 2/21/24

Episode Date: February 21, 2024

Investors have had this day circled on their calendars for a while and it’s finally here: Nvidia’s Q4 results. We have you covered with the numbers and analysis from all angles, including where the stock goes from here and what it means for the rest of the market. BD8 Capital’s Barbara Doran, DA Davidson’s Gil Luria and Moor Insights & Strategy’s Patrick Moorhead dig deep into the numbers. Bessemer Venture’s Byron Deeter and Lux Capital’s Josh Wolfe give their take on what Nvidia means for the private markets and what companies and sectors could be next. Plus, Closing Bell Overtime’s 1-year anniversary. 

We've got a comeback for the major indices, the Dow and the S&P ending in the green near the highs. The Nasdaq still a bit negative. Well, that's the scorecard on Wall Street. But now, winners stay late for NVIDIA earnings. And today we're coming to you live from our new studio here at CNBC's global headquarters. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. We have a very big show for you today. In less than 20 minutes, we will get those NVIDIA numbers, and we have a team of experts ready to help you figure out what they mean for the stock, the tech sector, and the broader market.

We also are awaiting earnings from Etsy, Rivian, Lucid, and others. We will bring you those reports as soon as we have them as well. Think of them as the trailers before the movie. Let's kick things off, though, with our panel as we await NVIDIA. Joining us now is Barbara Duran of BDA Capital and Partners, Gil Luria from DA Davidson, and Patrick Moorhead of More Insights and Strategy. Pat, I'm going to go straight to you as we talk about NVIDIA. The scale of what we're talking about, the data center business is the one that has AI in it.

It's the one that's just been ripping. The question is, are we going to get north of 375 percent revenue growth year over year? How high above 17 billion dollars in revenue are we going to get? When's the last time we saw something like this in a stock? I mean, it's been a long time. Let's go back to dotcom era when Cisco was the greatest appreciating stock out there. And but no, this is this is somewhat unprecedented given the amount of it. I do believe that NVIDIA is going to beat expectations. But the question is, will it be enough on the data center side to satisfy investors? Probably not because of the expectations are just so high.

But we've said that before, Barb. People have said that before, I should say, and the stock has continued to push higher. What was your takeaway from what we saw the cyber stocks do today in reaction to Palo Alto Networks? That was down nearly 30% for the day. CrowdStrike, Sentinel-1 and Zscaler taken lower. Probably a big part of the reason why the Nasdaq still ended down. The security names were the worst performers in the Nasdaq 100.

Right. Well, I think Palo Alto is considered the leader in cybersecurity for many good reasons. So when they blew up, basically, I mean, they cut their guidance severely it wasn't just a percentage or two that affects all of them because if they're the best and they're cutting guidance even though some of these other names they've already reported and their guidance was okay you know it probably means it's a buying opportunity in all of them so made another day to probably wash it out okay gail Gil, I want to get your thoughts, what you're watching for NVIDIA as we do await those results. And as we have seen those shares sell off a little bit here starting the week ahead of these earnings, given the fact that we do have expectations so built into this name. Well, the results today are going to be spectacular. Their growth is going to be spectacular. They're going to exceed spectacular they're going to exceed expectations and as they set expectations for next quarter and perhaps for the rest of the year those are going to be far

ahead of numbers we know that because their customers told us that amazon meta microsoft and google told us they are accelerating spend on gpus this. We know that supply is easing, so they'll be able to deliver on those orders. So the results for this year should be great. And in fact, I would say unprecedented. I agree with Patrick's parallel to Cisco, but this is on an even bigger scale in a good way and probably in a way that we need to think about a little more cautiously in terms of the out years. Okay. Barb, Ben Emmons over at New Edge today pointed out that for every one percent change in NVIDIA stock price, the index, the broader index, the S&P 500 can decline by close to one percent. That it's beta to the market is at over two point one. It's the highest among the mag seven.

It's also the last of the mag seven to report. So as goes NVIDIA, so goes the market, arguably, here. That being said, we had Fed Minutes today. We have had other earnings, including more earnings that we're watching here after the bell. What matters the most? Well, you know, it's interesting what you saw at the close of the day, you know, and also some of the tech stocks recovering. So it tells me this really is, NVIDIA is important, but, and because it's also a major part of the indices, it does affect the indices, but it's not affecting the broader market. You know,

whether they report, it's a question of, has the stock already discounted what investors are expecting? So even if they surprise in the upside, you know, we'll see what happens to the stock, but it don't affect the broader market because the broader market is really on individual company earnings. And what NVIDIA is doing, we already know the AI story. We're all looking at how it's broadening out, who's going to benefit in the future, who's buying, who's going to be making inroads like Intel with their Microsoft deal today. So I, you know, yes, it does move indices in a big way. You know, somebody pointed out today the QQQ, you know, a Nasdaq 100. It's I think NVIDIA is a third of that. But it's not.

I think this is a very short term reaction. The fear and trepidation going into this print is really quite extraordinary. So, Pat, two things about NVIDIA that I'm wondering, and that's the guidance and the ripple effects of competition. On the guidance, I think the consensus expectation is for data center to be 19 billion for Q1, which is, you know, that's a lot. But that's what the consensus is on paper. I don't know if that's what's really priced for, if you have thoughts on that. And then you've got AMD, you've got Intel that are trying not to top NVIDIA necessarily in performance and just put products on the market that from a cost perspective, get people to pay attention. How much of a risk is that for that stock going forward? Yeah. So first off, I talk with not only all of NVIDIA's

competitors, but all of their major customers. And they want choice. They do not see that it being a healthy market with estimates of NVIDIA having 95% market share in at least the Western data centers, and they want more. But with that said, AMD and Intel can't show up with something that isn't competitive. And on the AMD side, they've absolutely shown up with a competitive part for LLMs. And then Microsoft is going to be, excuse me, Intel is going to bring out its GPU in 2025. And at least as it relates to training, and if you want the most flexible inference, GPUs are the game now. I do believe that NVIDIA, even with the new competition, can still grow in astronomical proportions. I believe we're in the first year of a three, three and a half year data center build out to be able to deal with all these models. And

everybody's going to be waiting for NVIDIA at GTC to come out with the next new thing, which historically they've put their competitors in the rearview mirror. OK. All right. We're starting to get some of the other earnings. Lucid results are out. Phil LeBeau has those numbers. Phil. Hey, Morgan, take a look at shares of Lucid under a little bit of pressure after reporting a loss in the fourth quarter of $2.09 a share. Revenue coming in lighter than expected at $157 million. The street was expecting revenue of $180 million. They end the year with $4.78 billion in liquidity. That's been a question for a number of people on Wall Street in terms of where's the liquidity? Will they have to look for more liquidity in 2024 or 2025? In terms of production this year, the guidance is for 9,000 vehicles. They produced a little over 9,000 vehicles last year. So that may be interesting for a discussion

on the conference call in terms of you've stabilized, keep dropping on the production over the last year. You've stabilized at at least 9,000 vehicles. Now the question becomes, what are you seeing in terms of demand? And when do you think you start to increase production? Can you increase production perhaps later in 24 going into 25? Guys, back to you. All right, Phil, thanks. And that stopped bouncing around just fractionally higher. Meanwhile, Etsy earnings are out. Julia Borsten has those numbers. Julia. Hey, John, Etsy's earnings missing estimates, the company reporting 62 cents in earnings per share, short of the 78 cents estimated. But revenues are beating estimates coming in at 842 million versus the estimate of 828 million. It does seem like the stock is being weighed down by that earnings miss.

Now, just to get into guidance here, they say they currently expect the first quarter to be our low point in year-over-year growth in terms of revenue. They also say GMS for the first quarter of 2024 is currently estimated to decline in the low single-digit range on a year-over-year basis. So they're warning that the first quarter is not going to look good, but things are going to get better from there. We now see that shares are down 4% in after-hours trading. Back over to you. All right, Julia Boorstin, thank you.

Barbara, I'm going to go back to you. I'm going to start with Etsy, although we could probably talk about Lucid, too, as we await Rivian earnings and what these proxies mean for the overall EV market. But with Etsy, when I see a miss on earnings despite revenue topping estimates here, I got to wonder if we're starting to see some impact from things like the Red Sea diversions and supply chain and transportation issues that we've been talking about. But up until now, we haven't seen impact from. Yeah, it's interesting because it obviously means somewhere the costs are going up. But if you look at marketing is probably one of them. I mean, you look at the Super Bowl ad that they did. That is

not cheap. And other initiatives they're doing because they realize that there is very little brand recognition of Etsy. People don't recognize it. They just go in and look for one or two gifts. So you've got also initiatives that got improved their search function. So they're working on that. And that can be expensive in terms of the technological improvements. They're working on set tools for sellers, making it easier for the buyers. So they're doing a lot of initiatives that could be a lot of costs. And the question will be on the call, you know, how much is it and how long is that going to last? And we'll see what kind of improvement, because one of the things they need to do, you know, the average buyer is

only buys three things a year on Etsy. So they've got to increase the repeat buying. They've got to increase the ticket, you know, amount of the ticket per purchase. And it's a tough road to hoe. So we will see what what they say and also their gift initiatives. That's a big one that they're trying to get people to think of Etsy as a place to go for gifts. All right. Barb, thank you. Great to have you as always. And Pat and Gil, we'll see you again in just a bit.

Meanwhile, Rivian earnings are out. Phil LeBeau has those numbers as well. Phil. John, there's a reason Rivian shares are under pressure and it has to do with their guidance. But first, let's go over the results from the fourth quarter. This is a miss in terms of the bottom line, a wider than expected loss of $1.36 a share. The street was expecting a loss of $1.32 a share. Revenue coming in slightly better than expected at $1.32 billion. The street expecting $1.26 billion. Some of the numbers within the numbers in the fourth quarter, adjusted net loss of $1.09 billion.

That's an improvement year over year. They lost almost $1.5 billion in the fourth quarter of 2022. The 23 net loss for the entire year, they lost almost $4 billion after losing $5.2 billion in 2022. And they end the year with $9.37 billion in terms of liquidity. Now for the guidance, and this is why the stock is under some pressure here. Rivian's 2024 production guidance, 57,000 vehicles. The street is expecting 66,000 vehicles

to be delivered this year. Do the math there. They only produced a little over 57,000 in 2023. Now they're saying they expect to produce 57,000 in 2024. Look, they've got some lumpy cadence in terms of production and some switchovers with the plant in central Illinois, but that number is weaker than the street was expecting. Adjusted EBIT loss guidance of $2.7 billion, CapEx 1.75, and they expect a modest gross profit by the fourth quarter. Again, a miss in terms of a wider than expected loss in the fourth quarter for Rivian a miss in terms of a wider than expected loss

in the fourth quarter for Rivian. Guys, back to you. All right, Phil LeBeau, thank you. Etsy shares also falling in overtime. Let's bring in Shweta Kajuria of Evercore ISI. Shweta, it's great to have you on. Want to get your initial response to the results we just got, and specifically the guidance that calls for a fall or a decline in GMS, although it does seem like that could potentially be the trough? Yeah, well, first of all, thanks for having me. My initial reaction is that it is negative. In our preview, we called out we were expecting a beat and investors were expecting a beat in the quarter. But really, it was all eyes were on the guidance and especially the full year guide.

And that came in below expectations. Now, the biggest the guidance and especially the full year guide. And that came in below expectations. Now the biggest question is, is the full year guide actually believable? This management team has a lot of credibility. They're very well regarded. So they likely will execute upon their guidance. But it's calling for first quarter being the lowest growth rate quarter and then improving through the year. Even if we put those numbers in based on their guide, street estimates will most likely be coming down with full-year GMS at down, call it low single-digit percentage and revenue growth faster than that because they've also

guided for take rates. The biggest question into the quarter was also around take rates, whether there's going to be an announcement that Etsy is raising its take rates. And so far I have not seen it, so there will be some questions on the call about that. Also about Elliott Management's involvement now that Mark has a board seat. And also about what, how the level of confidence they have in their marketing span, because they're seeing a lot of competitive dynamics with the Asian e-commerce platform. So a lot to unpack during the call. All right. And you've given us a good packing list to know where to put it.

Shweta, thank you. Shweta Kajuria. We are just minutes away from the moment the market's been waiting for. That's NVIDIA's earnings. Up next, our all-star panel is standing by to bring you instant analysis as soon as those numbers hit the tape. Don't go anywhere. Overtime's back in two. Welcome back to Overtime. We're just moments away from potentially market-moving results from NVIDIA. We're bringing back Patrick Moorhead, CEO of More Insights and Strategy, and Gil Luria, Senior Software Analyst at DA Davidson.

As we do await these results, Patrick, I'll go to you here first. I mean, certainly data center is the segment that everyone is so focused on, given AI and the realization and monetization of AI. But gaming, automotive, and then, of course, the fact that a large chunk of NVIDIA's revenue does come from China, and we are continuing to see these tensions between the U.S. and China. How much are these other segments and these other markets going to matter despite the AI story? Yeah, so I think in particular, gaming is a big one. And if you recall about two years ago, that was the story, maybe three years ago. And they have steadily been digging

themselves out of an inventory glut. The biggest challenge in gaming for NVIDIA is the lack of AAA titles that taxes it. I am expecting a good quarter based on the new silicon and cards they have coming out. Automotive, it is interesting. But for instance, last quarter, it was $261 million on $18 billion, which is, at least from an overall financial standpoint, almost irrelevant. Okay. Yeah, we're just a couple minutes away, Gil, from when we're first expecting that these numbers might cross. And it's about more than NVIDIA.

It's about the entire semiconductor space. Also a lot of software names that have been moving on AI, I imagine. What do you expect the ripple effects here to be? Matt, I don't necessarily expect there to be ripple effects. I think the results we're going to see from NVIDIA today are results of the hype we've had to date, of all this momentum around building generative

AI tools and using them. That's led to Microsoft, Meta, Amazon, Google placing these huge orders last year to get chips from NVIDIA this year. So I think it's more of a backward looking indicator in terms of the hype we've seen. I also want to add to the previous conversation with Patrick that I would be careful about separating the gaming numbers from the data center numbers right now, because there's been reports out there that gaming chips have been retooled to be used as AI chips, especially in the Chinese market, because they didn't have access to chips. So we may actually see a really good gaming result that's more of a spillover from the

demand for data center chips. Okay, noted. You know, NVIDIA CEO Jensen Huang told reporters in Taiwan just last month, Gil, that the single greatest challenge in AI that he's seeing is the fact that they're very severely, quote unquote, we are severely supply constrained. What is it going to take to see those production numbers ramp up and NVIDIA be able to fully meet the demands that is perhaps in the marketplace? Well, this is one of the things that NVIDIA has done an incredible job. For a company that produces hardware, you need to actually physically produce it and had $25 billion worth of sales just a year ago and is probably going to exceed $100 billion sales this year.

The fact that they've been able to work with their supply chain to increase the supply to a point where the reports now is that you're looking at a low single month's delivery is remarkable as well. TSMC, their main partner, has been able to expand their capacity very significantly in order to capture this demand. And again, this is one of the reasons they could have a really great 2024, is that they can actually do a better job of meeting the demand that they have better than last year where they were just catching up to it. Pat, what is it that we're not going to hear, you think, today? Four weeks from now, we do have GTC, which I think used to be called the Game Technology

Conference, but now it's all about AI. And there's an analyst meeting connected to that where there's going to be an extended sit down. I will mention that those numbers are crossing the tape right now. We'll get them to you for NVIDIA, NVIDIA's earnings as soon as we go through them. But, Pat, what are we not going to get from these numbers today? Yeah, what we're not going to get is the future, any definitive call on that. And the two things that I want to hear from GTC is, A, is NVIDIA getting into the custom SOC or the custom ASIC market, which I think is a big thing.

Hold on, Pat. Got to pause you there. We do have those numbers. Let's get to our Christina Parts and Evelis with them. Christina. So for Q4, we're seeing earnings per share of $5.16. That's a beat compared to the $4.64 the street was anticipating. Revenues also a beat, $22.1 billion. The street was anticipating $20.61 billion. I know we're talking about data center revenue. May as well bring that up. Data center revenue for Q4 coming in at $18.4 billion, higher than the $17 billion anticipated. Similar for auto, $281 million, a little bit higher.

And I'll continue to go through the results and get back to you shortly with guidance. Christina, yeah, stick around. I mean, it looks like the outlook for the first fiscal quarter of 25 is $24 billion in revenue, which I think would be versus $22 billion expected. I mean, that's was talking about, $23 billion, some even saying a little bit higher. So it's not a massive beat. That was the big concern going into this earnings report as to why we saw the stock drop three days in a row. There was concerns that the magnitude of the beat wasn't going to hold, and you had some profit-taking leading up to it. Could be contributing to the 3% drop that we're seeing right now. To your point that $24 billion, it's still strong, especially for Q1 guide, but it's not the same type of caliber that we've seen in the two previous quarters.

All right. Pat, want to get your reaction to the numbers that we do have so far with a beat on the top and bottom lines, beats for data center revenue, beats for auto. And to John's point, it looks like better than expected or at least stronger fiscal first quarter revenue guidance as well? I said I expected a beat, and that's exactly what they did. And, you know, it's kind of a double-edged sword when you see availability getting better, which is, hey, I can probably get more cards to you that you need, but you lessen pricing power. So very positive on that. And I think, again, the size of the auto business and the range it is in the 200 million-ish doesn't make an overall huge statement, but it is a good sign for the future of what they need to do, whether it's two, three, or four years down the road. Gil, looking at data center specifically, it looks like the number came in at 18.4 billion for Q4 versus 17 billion expected.

And of course, that's what you need if you're going to get revenue beaten by two billion dollars. You need strength in data center. What does that say about the continuing data center demand and maybe about the other areas, including gaming as well? What you said would be a little difficult to parse out. Right. So the fact that the number is so high and that they guided for an even higher number next quarter is a reflection of what we heard from the hyperscalers on their conference call. We heard from Amy Hood and Microsoft. We are accelerating our purchasing. We heard from Mark Zuckerberg, very specific goals about the amount of GPU he needs. We heard from Amazon that they're finally getting access to supply. So that demand is still ramping through the year. And that's reflected in these numbers. I would

just say Christina did a very good job reporting that the whisper number on the buy side was so much higher than the consensus number that if that because they didn't quite get to that number, maybe the stock isn't doesn't isn't showing the upside that it would ordinarily with this kind of result. All right. We're going to go back to Christina. We're not going back to Christina. Pat, I'm going to go to you here because just looking at first quarter fiscal 2025 outlook here in terms of margins, gap and non-gap gross margins expected to be 76.3, between 76.3 and then 77 percent respectively, plus or minus 50 basis points. I guess walk me through the importance of gross margins as we do look to another year for this company where the expectations have been so strong and where, interestingly, the stock is now trading up about 1%. Yeah, so NVIDIA has had pricing power for the past 18 months, particularly on its new line. When you can't get it, you can essentially name your price.

And a car that would normally go for $20,000 being sold for $40,000 and even more on the open market, it's great. On the flip side, your cost of goods sold from folks like TSMC and the folks doing the high-speed, high-bandwidth memory are charging more. But net-net, the margins look incredible. And I'm glad to see there wasn't necessarily a movement down that you might expect as supply from TSMC wafer and packaging improved. So it's impressive. Gil, in a way, it's remarkable that the move that we've seen in NVIDIA thus far, you know, was initially lower. Now it's fractionally higher. And, of course, you've got to wait for the conference call for all kinds of color.

Executives will have a lot to say as the afternoon commences. But this is a stock that the options market was expecting to have a dramatic move. And so, in a way, Gil, it seems like modest moves based on these strong numbers might be a win for NVIDIA. Yes. And I would say that as we start looking towards the conference call, what we're really going to be listening for is commentary about 2025 and 2026. I'd say on the last conference call, Mr. Wang did a good job of talking about the vision of why he sees the cycle continuing for a couple more years, as Patrick reflected. I think there may be more of a need for him to be specific. Orders coming in for 2025, maybe levels of backlog.

That's what we're really going to be listening for to justify another move up from here, because the multiple is only low if you think there's positive growth in 2025 and 26. So that's where a lot of the discussion is going to migrate to, especially on the conference call. Okay. Christina has more from this earnings report for us. Christina Parts-Navalis. Yes, I was just quickly going through the CFO commentary and you guys bring up data center revenue. Data center revenue did climb 38% sequentially, so quarter over quarter. And a big portion of that data center revenue actually does come from China.

Previously, the company has said about 20%. So in the CFO commentary, they did say data center sales to China declined significantly in the fourth quarter due to U.S. government licensing requirements, something that we already anticipated, but points to the strength in demand if such a strong portion of that pie was weaker, and yet they still managed to beat 38% quarter over quarter, an increase for data center revenue. So that's seen as a positive. There's no other mention of China in the entire CFO report, but I'm sure there'll be more on the call. Interesting.

Gail, I'm going to go back to you on that since I did ask you about China earlier and the fact that they do seem to be offsetting that sales pipeline that was going to China now to other, what's the word I'm looking for, to other customers. What that tells us about the demand picture versus production. I guess I should say versus demand versus the supply and how they keep up with it. Well, that's right. There's more than enough demand right now. So a shortfall in China isn't as important. Longer term, the Chinese market is incredibly important. And there's a lot of dynamics at play. The fact that we are limiting chip sales to China is one of the reasons they're limiting

sales of iPhone in government agencies. So we have to see that change. The Chinese aren't very happy about the fact that the government is making Nvidia sell them inferior chips. That's not something Chinese want to hear. So again, I would look at sales to India, sales to Singapore, sales and gaming as being proxies for those chips still making it into China right now. Later on, there's going to be a solution that's acceptable to the U.S. and the

Chinese government. Right now, we're probably getting chips into China in an indirect fashion. Okay. Christina, Gil, and Patrick, thank you for joining us. Thank you. Up next, much more on NVIDIA's big report, what these numbers could mean for the mega caps in the broader tech sector in the months ahead. That's after this quick break. Overtime, we'll be right back. Welcome back. Well, don't blink. We might get that big move that the options market was looking for after all in NVIDIA. Shares of NVIDIA now higher by about 6.5%.

It's not the only one. Some other stocks moving in sympathy. Supermicro, the performance hardware maker that uses a bunch of their chips, is up now 10%. AMD up about 3. Arm Holdings up about 5. Joining us now to discuss NVIDIA and the ripple effects that we do seem to be getting, at least in overtime, Byron Deid, our partner at Bessemer Venture Partners. Byron, welcome. Good to see you again. I was just talking to an entrepreneur today who's about to announce a Series C, which I think you might be involved in, where that money is going.

And part of it is going to accelerator chips. Maybe that helps to explain how NVIDIA has managed to beat these already high expectations. Thanks, John. Great to be back, especially in this fun day in tech. And indeed, one of your prior guests called it hype. I call it market demand. This AI wave is real, and it's fueling a tremendous pull-through of real spend. So what about, though, the predictions from the CEO of Databricks, the CEO of MinIO as well, that these accelerator chips are going to get cheaper, that there's going to be competition that comes in, brings prices down? Do you buy that, or is NVIDIA so far ahead with such unique technology that it's going to maintain pricing power and volume growth?

A little bit of yes and yes. I absolutely believe that the demand is there and increasing. trends that he sees coming as the hyperscalers, AMD and Intel, and dozens of pure play startups come in to try to compete for this GPU market. And so that's entirely a game on how fast can they innovate? How can these challengers emerge? And can they eat into this dominant market share that NVIDIA has maintained? Right now, they've maintained a majority of the AI processing market share while this space has grown at a massive rate. And it's been impressive to watch. People have been expecting perfection from them.

And frankly, they basically delivered that again today. Yeah. I mean, just to feed off of what you just said, I mean, the fact that NVIDIA is up and AMD is also up, Intel is also higher in sympathy here. How much does that speak to how quickly this market is growing and outpacing, to your point, that the demand is outpacing the supply, and even as competitors do start to move to come online? Yeah, simply put, the artificial intelligence wave is the next big trend in software. It is this next horizon in cloud computing, and it's going to continue to pull through massive demand for many years ahead. These software companies aren't building their own stacks in the vast majority of cases, and so they are dependent on these hyperscalers and infrastructure providers to power this revolution. And so the demand curves that we

see within the private sector, which is the leading indicator to the pull-through of these chips, is just building. The big question out there and what people are trying to anticipate is how will these new entrants come in and start to compete for delivery? And so that hardware battle is on, but I can tell you with very high confidence that the iceberg under the surface that people can't yet see of software companies building in the public markets. Private markets, soon to be public markets, is unstoppable. There are hundreds of high-quality venture-backed companies that are emerging now that are starting to build up real scale. And Byron, that's what people often miss. It seems to me, when you're talking about a chip company, hardware companies, the moat that they have is often defined by software. And NVIDIA develops

a lot of software. It's been investing in a lot of software companies. What might we hear from Jensen Huang on the call and later tonight that explains how that moat continues to develop? Yeah, I mean, they're building moats in several ways. Software is certainly one. The raw chip capabilities is another. And frankly, their ecosystem is a third. You see them extremely active in venture investing themselves as they're getting these leading companies to bet on their stack as they scale up. And it's extremely clever. They're trying to take what is a short-term market share game advantage with this supply shortage and turn that into long-term sustainable competitive advantages. It's hard to do in hardware, but they're very strategic about how they're going after it. And

frankly, they've got a pretty compelling chance to pull this off because you see these dependencies starting to roll through into the software stack. So we talk about the picks and shovels. We talk about NVIDIA as sort of the first player in the market and the first real major realizer of monetization of AI. We talk about some of the other names on the hardware side, like Supermicro, that have seen major moves in the public markets as well. When we start to shift over to software, especially as you talk about hundreds of players in the space on the private side, what are the names that are going to be the next big movers as this starts to transcend the monetization of this into the software side?

Well, I think there is that shortage of names to bet on in the public markets, which has created the scarcity effect also for stocks. But if you look one layer down, people are absolutely starting to focus on the private side. And some of the big horizontal providers like a Canva that's integrated AI beautifully into their suite and is building scale. There's pure play vendors like Perplexity that are horizontal, going after Google's core search, powered by AI. There are vertical AI companies like EvenUp and Law or ServiceTitan and Field Automation that are rolling this in, and they're getting into hundreds of millions or billions of dollars of scale already. The most watched IPO of this year will probably be Databricks. There's a lot of speculation

on if and when they may go out, but they're challenging Snowflake head on and they're benefiting from this reacceleration that the AI pull through is causing. And so there's dozens of these high quality names worth billions of dollars in the private markets that people are going to start to see turn public over the coming quarters.

Okay, Byron Dieter, thanks for joining us. With shares of NVIDIA now up 6 percent. And as you can see on your screen, quite a list of names, both on the semi side and on the software side, publicly traded that are higher in sympathy. Thought there might be. Yeah, we were kind of planning on that. We had a whole list that we've been watching. Well, up next, your earnings roundup.

A parade of results hitting the tape this hour. We're going to bring you a scorecard of all of the key numbers and stock moves. Plus, Lux Capital's Josh Wolf is back. He'll tell us how he thinks today's NVIDIA results could impact the AI trade going forward. Over time, we'll be right back. welcome back on the heels of that blockbuster nvidia report let's take a look at some other key movers here in overtime shares of rivian well they could use an accelerator the company posting a larger than expected loss vehicle production guidance was softer than analysts expected on the flip side take a look at shares of Synopsys. Shares moving higher by about three and a half percent after

reporting a beat on earnings and revenue in line with estimates. Guidance coming in stronger than expected. But Morgan, it's really still all about NVIDIA this hour, isn't it? It sure is. And that is the big story of the hour. It's the big story of the afternoon of the day. NVIDIA shares still popping here on overtime. You can see that spike right there up about 6%. Lux Capital's Josh Wolf will tell us how he thinks this will impact the AI trade in a CNBC exclusive. That's coming up after the break. We'll be right back. Welcome back to Overtime. NVIDIA shares in the green, beating on both lines, beating on data center revenue. For more on NVIDIA and its impact on the AI trade, let's bring in Lux Capital co-founder and managing partner Josh Wolf.

Josh, it's great to have you back on the show on a day where we are seeing NVIDIA, sort of the main player when you talk about so-called picks and shovels of generative AI. You're seeing them report earnings that are up 769% for income year over year for the quarter. It speaks to how quickly and how aggressively AI applications, or I guess the ability for infrastructure for applications, is being adopted. Walk me through it. Well, you know, it's interesting. It was probably eight years ago I got a preview of NVIDIA becoming the soul of the new machine. We were investors in a company called Zoox. Amazon would buy these guys. And I was like, what are these guys training these new machines on for autonomous vehicles? And they said these new NVIDIA chips. That was

when NVIDIA was a $15 billion market cap. At the time, Intel was $150 billion market cap. You fast forward today, over $1.8 trillion. Just absolutely incredible. I do feel, though, right now you're seeing a flood of retail investors start to get excited about NVIDIA. They're probably five years too late. I always say that you want to be today where you should have been five years ago. You have a dynamic where $1.8 trillion market cap against Google, roughly $1.8 trillion market cap, they're generating $60 billion of revenue. Remember, Google is generating $60 billion of cash flow. So I would just say it is real. The infrastructure build-out is serious. And it is

also a time for caution and not to see this as like some crazy meme stock. This is being, in my sense, overbuilt right now, which will be massively deflationary for many of these AI chips. Interesting. OK, so when you say five years too late, what especially as a retail investor, I know you're focused on the private markets and VC venture capital specifically, but we talk about five years too late. What would be right on time right now? You know, it's really interesting and almost a little bit contrarian. Everybody is racing to the future right now. And, you know, it's a time when rates have risen for the past two years.

When rates are rising, it flips the dynamic that we saw for the past 10 years, which is low rates are like a tractor beam for the future. They are pulling far out, fanciful ideas that are maybe 20-year things into these 20-month frenzy projects. Now, with rates rising, a lot of entrepreneurs and a lot of venture capitalists, you have to ask the question, have you learned the lesson of the past few years? I know we're in the election year. I know the White House and the Fed want to create a wealth effect, want to fight inflation. These two things are sort of incompatible. I actually think that the contrarian thing to do right now that people are going to realize five years hence is not race to the future to fund space elevators and fusion and all kinds of crazy stuff that we ourselves love to fund, but we like to reduce that gap between science fiction and science fact. Right now, we're obsessed with the theme of maintenance. You think about

CapEx. There's two parts of CapEx. There's growth, which everybody's been funding, and maintenance, which nobody's funding because nobody wants to think about the trillions of assets that are there right now that should be fixed. That's in defense. That's in biotech. That's in infrastructure. That's in artificial intelligence, specifically for the open source software systems would love to see that this NVIDIA thing is overdone because so much of the money that they're giving to these startups is having to be spent on accelerators and compute. But what if NVIDIA is actually able to maintain this lead they have and if the nature of the data center has fundamentally changed? Well, remember, John, you make a

great point. What any one company does individually is rational. Facebook building out, Microsoft building out, Google building out, NVIDIA building their own clouds, lots of other providers trying to give you compute access through NVIDIA chips. What happens, though, collectively is it's irrational. And there has never been a boom where we haven't seen something get overbuilt. So I was a massive bull on NVIDIA going back eight plus years ago. And I'm not a bear, but I just think it's a time for caution that what can go on forever will eventually stop. And I do think that this is going to end up being deflationary. I think lots of other companies are looking at how do we take AMD, pair it with new languages like Python, to take on NVIDIA and CUDA and give people

alternatives. So I would be more interested at the moment in AMD over NVIDIA. But I do think NVIDIA's got a pole position. There's going to be a lot of alternatives. Again, you look at something like Together Compute, massive distributed computing, doing it way cheaper. That said, it seems like we're in a period where AI accelerators, where these chips are the currency of the future and all startups need access to them in order to build the kind of lead that

they're going to need in their respective industry that they're targeting in order to pull ahead. Isn't that the case right now? It is. And again, do you need open AI plus Anthropic and Claude plus 10 other large language models? Many of these things are going to see a winner takes all and the massive amounts of money that they're raising. We're talking billions of dollars, and you nailed it. A lot of that money has been and is going to NVIDIA. But I think that that starts to level off. What's really interesting to me is the next wave, and that's not going to be just large language models.

That's going to be in robotics. I can tell you that there are some really cutting-edge teams right now coming out of the likes of OpenAI and DeepMind and elsewhere to focus on AI for robots. It's a totally different infrastructure that they're going to need. Same thing for biology. Automated wet labs and robots doing scientific experiments, that to me is the near-term future of maintaining the cutting edge for both biotech and for AI. Then you talk about defense, and you're still going to see a huge amount of AI in defense, but specifically around maintenance. That's exactly my question for you, Josh, because you did also just publish this letter today. Two of the names that are trading higher in sympathy with NVIDIA are Palantir and C3 AI,

which both contract with the Department of Defense. So the fact that you use the B word, bubble, where defense tech is concerned, what does that say? Well, again, I always like to be early to things, and sometimes being early is the same thing as being wrong. I know that, okay? But in this case, defense, it has all the hallmarks, not today, not in the next two or three years, but in the next four or five years, it's going to be a bubble. Why? You have companies like Anduril and Saildrone and Hadrian. Hadrian just announced $118 million Series B. These are all Lux portfolio companies. We're super proud of them. They're rebuilding the arsenal of

American democracy. What happens next? Copycats try to follow. They look at them as proof positive. Hey, those guys just raised a lot of money. Their valuations are increasing. Tens of billions of dollars revenue coming in. Billions of dollars of bookings. We can do the same thing. What happens next? Investors follow. Then fund to funds. And the fund to funds thing is interesting because you get a moral layer where you're disconnected from some of the ESG concerns of being involved in a kill chain. That's something that we as investors had to say, are we comfortable with that? So I think you're going to have a flood of capital coming into defense. Eventually, it's going to be a bubble. We're five years away from that. All right. Josh Wolf of Lux Capital. Always great to have you on. Thanks for joining us.

Great to see you both. And NVIDIA now up 8% in overtime. All right. Josh Wolf of Lux Capital. Always great to have you on. Thanks for joining us. Great to see you both. And NVIDIA now up 8% in overtime. Coming up, we're counting you down to the calls. NVIDIA and Etsy, among the many companies kicking off their earnings calls at the top of the hour. What we'll be listening for is ahead when overtime returns. Welcome back to Overtime. NVIDIA, it's now up 9%. It is just moving higher ahead of the call.

But believe it or not, we have now officially been saying welcome back to Overtime for an entire year. John, you and I have been at the helm for the show for one year. Happy, happy anniversary to my work husband and partner in crime. We talked about playing Time of Your Life and doing the dirty dancing thing, but we don't have enough time. We're, you know, that does it. Fast Money begins right now.