Closing Bell - Closing Bell Overtime: Nvidia Beats Estimates, Expects Supply Constraints For Several Quarters 11/20/24

Episode Date: November 20, 2024

Maybe the market’s most closely-watched earnings report, Nvidia, reported strong third-quarter numbers. The chipmaker beat analyst expectations for earnings and revenue and provided strong guidance. We have you covered from every angle with Bespoke’s Paul Hickey, Moor Insights & Strategy CEO Patrick Moorhead. Plus, one of the few analysts on the Street with a hold rating, DA Davidson’s Gil Luria, on what he needs to see to change his rating. 

That bell marks the end of regulation. Out front, ringing the closing bell at the New York Stock Exchange. NESR doing the honors at the NASDAQ. And it's a mixed close as the major average bouts well off their lows with attention now turning to the crucial earnings results from, yes, NVIDIA coming in just minutes this hour. That is the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Ford at CNBC headquarters. And I'm Morgan Brennan joining today from Washington. Buckle up for one of the most important hours of earnings season. John just mentioned it. NVIDIA's report is due out in just a few minutes, and it could set the tone for the market's next

direction. And of course, we've got a great lineup of experts to help break down those results, including DA Davidson, analyst Gil Loria, NYU's Dean of valuation, Aswath Damodaran, and many others. And as we await those results, we've got even more. Paul Hickey of Bespoke Investment Group, Christina Hooper of Invesco, and Patrick Moore, head of more insights and strategy. Guys, welcome. Pat, on NVIDIA, you think they probably deliver a modest beat here. I'm curious about gross margins and whether these Blackwell overheating rumors affect the guidance. What do you think?

Yeah, so I think as we've seen the last four quarters, the street's getting better at calling top line and bottom line. So I think they're going to have a beat beat, but it's going to be smaller. And regarding the quote unquote Blackwell overheating issues, listen, I used to be in products, I did products and specifications change. And what happens is people put a little bit of give in expecting this. And when I did my channel checks with oems odia oems and cloud providers this had been expected there is smoke but no fire here yeah maybe literally since we're talking about overheating christina we're in the broader markets in the broader indices in this middle space specifically in the s p between six thousand and000 and 5,700. So how much does

NVIDIA and all of the stocks, maybe just as important, that it influences, how does it factor into we break out of that either higher or lower? I think NVIDIA certainly has the potential to have a material impact, especially in the shorter term. I ultimately think that it's going to be Fed policy and what we get from the Fed in December that dictates how we end this year. But for right now, for the next week or so, I do think it's about NVIDIA. I am optimistic that we will see good results and that will power the stock market forward. So, Paul, you know, it looks like investors have basically positioned themselves from an options standpoint for an 8 percent move in either direction with NVIDIA, which perhaps is similar to what we've seen in past earnings.

It does it does appear NVIDIA is so big, three and a half trillion dollar market cap that as goes NVIDIA, so goes the market. So what should we be watching as we do get these results? So I think that's an important point, Morgan. You know, depending on how you're positioned, if you're in index funds and you're just exposed to the market, obviously you want a strong report from NVIDIA to drive the market. It's seven and a half percent of the S&P 500. But if you've been playing the broadening trend and you're, you know, for some of the smaller cap, smaller large cap companies, you may not necessarily be rooting for a strong reaction from Nvidia because it's so large, like you said, it generally sucks the capital out of the pool

for other stocks here. So when you look this year, some of the strongest times of the year for Nvidia have been periods when the Russell 2000 and smaller cap stocks have lagged. And then in July, when you saw that big surge in the Russell 2000, it was also during a period when NVIDIA was seeing weakness. So in that respect, what you want to see from NVIDIA depends on how you're positioned.

As far as the market's concerned and how we're going to react, Patrick and Christina were talking about it. We're expecting a strong report, but they've reported seven triple plays in a row. That's, you know, for a company this large, it's practically unheard of. So they're not just going to need to beat here to get a positive reaction. You're going to need to see, you know, a pretty sizable beat. I'd say, you know, $2 billion ahead of revenues for the quarter and $2 billion ahead of expectations for the guidance for Q4 in order for the stock to basically stay flat, to have a modestly positive reaction. I think

anything short of that could pose trouble in the short term for the stock. Patrick, it's important to note that NVIDIA is not the only AI read we're going to get this hour when it comes to earnings. We're going to get results from Snowflake as well. We also get Palo Alto, but Snowflake in particular, potentially one to watch because we've seen this tug of war in the market with software stocks as they themselves transition and reinvent themselves or I guess just sort of reshift themselves for this new AI era. So how important is that report going to be given what we've heard from some of the other software players in recent weeks? So Snowflake isn't a bellwether, but they certainly are. They have the capability to take advantage of AI.

They're a cloud-based data management platform. On the plus side, the market's growing. On the negative, they're getting a lot of competitors, a lot of fierce competitors from Databricks. And every single one of the cloud giants has set up its own data management platform. And Snowflake still has not addressed where all the data is sitting, and that's on-premise inside of enterprise databases. Okay, I want to mention both Palo Alto Networks and Snowflake are out. We are going through the numbers. We'll bring them to you as soon as we get them.

Palo Alto heading lower to the tune of about 7% at the moment, and Snowflake in the opposite direction heading higher. It looks like more than 10% again at the moment. Of course, we've got the earnings calls there, but really curious to see what's driving that paul especially in light of what we were talking about just yesterday at microsoft ignite uh with so much of the focus being on data and ai do we have okay palo alto networks earnings are out steve kovac has the number. Steve. Hey there, John. Yeah. And shares are down here despite beats in the top of bottom line. We're looking at EPS here of a dollar fifty six adjusted. Street was looking for a dollar forty eight adjusted.

Revenue is also just a slight beat here at two point one four billion dollars. Street was looking for two point one two billion. We still see shares falling here. Looks like guidance is weighing down a bit. We'll be digging through these numbers and get back to you with more, John. All right, Steve, thank you. Don't miss, by the way, Jim Cramer's exclusive interview with Palo Alto's CEO. That's coming up at 6 p.m. on Mad Money. Reaction here, Paul, to these results out of Palo Alto? Yeah, so I mean, just those headline numbers, the revenues weren't very strong relative to expectations. So that could be an issue. What we're really looking to see for Palo Alto is how this platformization strategy is playing out. Remember back in February, the stock was killed,

warning of short-term pain because of their long-term goal of to get more customers on the platform. That results last quarter were strong and so it rebounded. So, I mean, we need to see more of what the report showed, but that's going to be the key focus in the earnings report, I think. And down 2%, you know, the stock typically moves, you know, 7% or 8% on earnings. So, I mean, that's 2 percent. You know, the stock typically moves, you know, 7 or 8 percent on earnings. So, I mean, that's nothing for a stock like Palo Alto. OK. Christina, I want to get your thoughts on the other news of the day and the other thing that's been driving markets, which has really been Fed speak. And it looks like we've got

Susan Collins, Boston Fed President Susan Collins headlines starting to hit the tape here where she's talking about any further slowing and hiring would be undesirable, and that she sees some additional policy easing needed, but unclear how much. Given the fact that markets have been repricing pretty aggressively for the growing possibility that we see the Fed pause in December, and the fact that we have seen some more hawkish-leaning, maybe not this, but some other more hawkish leaning comments from Fed officials. How important is that to the market here, especially when you think about the backup and rates and especially when you think about on the equity side, the growth picture for some of the companies we're talking about today, some of these tech stocks? I think it's important. Of course, we're getting contradictory

statements from different Fed members, as we always do. But the reality is that her sentiment is shared by Jay Powell, and that's important. He's said over and over again that he doesn't want to see any further weakening in the labor market. And I think that if the data supports the view that the labor market is weakening further, then we will see a rate cut in December. I think the Fed is going to be true to its word. It's going to be data dependent. And I think we could easily see four rate cuts over the next 12 months. Okay. Paul, Patrick, see you in a bit. Christina, thank you for joining us. Snowflake earnings out as well. Do we have those? We do. Seema Modi has them. Seema. Snowflake shares are surging in overtime, John, as the company beat on its bottom line and top line,

a five-cent beat on earnings with revenues coming in at $942 million. The estimate was for $897 million. I would point out product revenues up 30 percent nearly year over year. Some bullish commentary from the new CEO, Shridhar Ramaswamy, who says our obsessive drive to produce product cohesion and ease of use has built Snowflake into the easiest and most cost effective enterprise data platform. He also discusses that they are displacing competition over and over again. And going into this earnings report, one of the key concerns was that there is heightened competition in the cloud data analytics space from the hyperscalers like Amazon and Microsoft that are spending a lot of money to be a winner in this space. Clearly, results here coming in much better than expected, which shares up about 13 percent in overtime. I'll send it back to you guys. All right.

Sima Modi, thank you. And I will be speaking with Snowflake CEO Sridhar Ramaswamy a little later right after the earnings call. I'm going to bring you those comments first on CNBC tomorrow. Morgan? Can't wait for that. We're just getting started on overtime after the break. An analyst's first take on Snowflake earnings and what those results signal for the broader enterprise software and cloud industries. And we are just moments away from the main event. We will bring you NVIDIA's quarterly results as soon as they cross. We're going to break down the impact on the stock and the whole market. Stay with us. We've got a big show ahead. Overtime's back in two. Welcome back to Overtime. Some big movers already on earnings results this hour as we

await NVIDIA. Let's get back to Steve Kovach for more on Palo Alto Network. Steve. Hey there, Morgan. Yeah, there's going to be a two for one stock split at Palo Alto Networks. This is just announced by the board here. This is going to start at the end of trading on December 13th, and we'll start trading on that split adjusted price on December 16th. Meantime, we see shares down about 5% on Q2 guidance was coming in a hair light. John, I'll send it over to you. Steve, thanks. Meantime, as we mentioned, shares of Snowflake sharply higher after reporting beats on the top and bottom lines, giving strong guidance for Q4 product revenues. Snowflake also just announcing it's teaming up with Anthropic to bring cloud models to the AI data cloud. And joining us now is Jeffries analyst Brent Thill. Brent, which is a

bigger deal here, the strong product revenue or these remaining performance obligations at $5.7 billion given the consumption model? Hey, John, RPO accelerating, the biggest beat we've seen in the model for a long time. Accelerating the actual guidance more than the beat. This is one of the best quarters we've seen in a long time from Snowflake. Software's starting to get life back into it. We've said for the last three quarters we wish we were semiconductor analysts. I think we're excited to be back as software analysts. So software's coming back and really good to see the momentum here at Snowflake. Brent, how meaningful is it that Snowflake is confirming this multi-year strategic partnership

with Anthropic? I think it's important. I don't think it's the end-all be-all. There are companies that we work with that are embracing 10 large language models. Intuit mentioned it their analysts say they're going to have 10. Others have two. Some have five. Anthropic is obviously a leader. Snowflake has been behind in AI. And Sridhar, the CEO, came from Google, had said they were nowhere really a year ago to now getting on the right page in AI. So they have a long way to go, but they're on the right track. They're improving, which is the most important thing. And we think under Sridhar's leadership, he is working seven days a week to ensure that they get this right. So Anthropic's one of the key leaders that are out there. And so it's a

good partnership to have, but I'm skeptical in a lot of these partnerships, to be honest. They tend to not go anywhere. And everyone's announcing a relationship with NVIDIA to every other vendor in the industry. So you've got to be a little skeptical about the relationships. Brent, it seems like a big quarter for Sridhar, given what the stock has done so far this year. And a lot of this downdraft before he took over. How much does it matter why they have this momentum right now and how much valuation upside potential is there given his technology background versus the operational

background of the previous CEO? Yeah, I think it's important. Snowflake's been one of the worst performing software stocks of 2024. So I think everyone was pretty critical that, you know, the change out when you're talking about Slootman to Sridhar, you know, he did a great job in ServiceNow and did a great job at Snowflake. But they really need to bring in more product-led organization. And his technical experience is really helping out. Databricks was really taking a lot of Mindshare growth rate. They've done phenomenally well in accelerating their growth. And here, Databricks is accelerating and Snowflake's decelerating. So everyone's scratching their head. They're both in the data game. Why is this happening? So they need to make a quick pit

stop we've said the analogy for snowflake where sridhar is they went into the pit stop they got a new windshield uh a new radio and new tires and we think it's coming back on the road as a better car so we think it's going to move faster we think this is a better setup now and and again a lot of this is led led by Sridhar's technical expertise rather than, you know, the go-to-market piece. We'll leave it there. Brent Phil, thank you. Got to listen to the call, of course. Well, we've got breaking news now on a major fraud indictment. Seema Modi has that. Seema. John, this involves Indian billionaire Gautam Adani and seven other senior executives indicted by the Justice Department in connection with a

scheme to pay hundreds of millions of dollars in bribes to Indian government officials to and other senior executives indicted by the Justice Department in connection with a scheme to pay hundreds of millions of dollars in bribes to Indian government officials to access solar energy contracts and efforts to conceal bribery schemes from U.S. investors. Now, keep in mind, these fraud accusations were first came to light from short seller Hindenburg Research, which sent the stock in a free fall. Since then, it has rebounded. And we're watching enterprise and Adani Enterprises here in overtime, but clearly a stock we're watching closely. Back to you. All right, Seema Modi, thank you. NVIDIA earnings just a few moments away here. Let's

bring back Bespoke Investment Group co-founder Paul Hickey and More Insights and Strategy CEO Patrick Moorhead, along with CNBC Senior Markets Commentator Mike Santoli. As we do await these results, Mike, I want to bring you into this conversation and get your thoughts. Because, yes, we saw NVIDIA sell off into the close today. But in general, in the midst of geopolitical concerns earlier this week, NVIDIA bounced. I looked to yesterday. NVIDIA bounced 5% and took the market with it. So it speaks to how important NVIDIA is to the AI secular growth story, but also to the market more broadly. So how does that position us here where hopes are very, very high for this report? For sure. Yes, NVIDIA, certainly in the short term, just because of its heft and because of the way it crystallizes the AI theme, is very important. That being said, you know, when it really cracked after earnings in August,

the S&P hung in there for a few days. So I'm not saying it's either or. What I find fascinating about the setup is, you know, NVIDIA first traded as high as 140 exactly four months ago, June 20th. And it traded down from there, consolidated for four months just about, made some new highs recently, but really is in that same zone. So it should be pretty tightly coiled here to react one way or the other. Obviously, I think everyone's expectations have come in a little bit.

Now, I don't mean for the actual results, but the idea that they're going to be blasting through estimates and guidance the way they were before. So, you know, we roll forward the calendar. The P.E. doesn't look as crazy as it did before. So, you know, we roll forward the calendar. The PE doesn't look as crazy as it did before. So it's a fascinating setup, but it's a three and a half trillion dollar company. So, you know, it's not going to necessarily tolerate outright misses. Patrick, what is going to be the most important metric that you're going to be watching in real time as we get these results? it the data center numbers is it something else data center is all that matters i mean they have a lot of other meaningful business like gaming

and workstations and cars but it all rides on data center and specifically uh on the guide i think what investors need to keep in mind is there's so many new ways that NVIDIA can make money with the Blackwell generation, not just on the chip. You're looking at advances in networking. They're charging for software. So all of that comes along with Blackwell, and I recognize that that's later for the ramp. But we have seen signs, as Stacey Raskin talked about. We saw Dell shipping Blackwell. I'm at the Microsoft event right now, and Blackwell is in preview. So it's looking pretty good. While you're talking there, Patrick, in video results, how cross we're going through them,

initial move is down about 4%. Paul, we heard earlier, maybe it was from you, that there would need to be a $2 billion revenue beat in order for this thing to move higher. How much, though, is it important to get the full context of these numbers, especially because there are all these concerns about incoming quarters? How big is the pipeline? If they say some positive things about that, that could have an impact on the continuing reaction. Yeah, and you're exactly right. When I was talking about the guy that was, you know, more of a short-term, like, in the next couple of days. But later on in the fall, they usually got him a quarter ahead. We got the details ready.

Got to stop you there, Paul. Christina Parts and Eveless has the numbers. Christina. Yeah, we're just getting the top and bottom lines right now. Numbers, we are getting EPS of 81 cents per share. That is higher than the 75 cents estimates on revenues of 35.08 or 35.1 billion dollars, which is also higher. And I'm going to come back with more of the data center numbers and guidance in just a moment. All right. Back over to you guys. Yeah. Thank you, Christina. Paul, I'll let you finish. Yeah. So I think, you know, in the call, you know, hopefully there'll be more clarity on looking ahead to next year. What's the Blackwell production

going to be? We know demand is there. Whatever they can make, they'll, you know, will be bought, but it's a matter of production and how much they can get out the door. So that'll be, that's more of a longer term, but for the short term, it's the revenues. And I think it was just slight of a two billion dollar beat. So that's for what the stock has reported relative to expectations. That's not really that impressive compared to what they've done. Yeah. And I know you said you were looking for a beat on the guide as well. And we're going to get that info from Christina Partsenevos,

hopefully momentarily. But I got a sense from looking at it that this guide on the revenue side, on the top line, might not be quite as strong as some were hoping for. Patrick Moorhead filling in here, the data center revenue came in pretty darn strong here. Data center revenue, $30.8 billion. You mentioned that's really most of what you're concerned about here, right? It is.

It's the number that matters for investors, and it's where their stratosphere growth is coming from. And like I said, they came in and they beat, but narrower than they typically did. And now everything rides on this guide. And if there's any challenges with the guide, then there needs to be some explanation on the H-series to the Blackwell series, and the market will react. I agree completely with the speakers talking about if they didn't beat by a mile, then the stock's going to go down, right? And that we saw very similar characteristics. There was a little bit

of spooking on the Blackwell silicon issue. But once the market shoot through that and got through the call, everything went up and to the right. Patrick, we've got more. We've got more metrics to bring our viewers. Christina, what do you have for us in this report from NVIDIA? Let's start with the guidance, because that's what everybody was looking for. Q4 revenue, thirty seven point five billion higher than what the street was anticipating, but still lower than the whisper numbers that I was seeing, anywhere between $38.5 to $39 billion. The CFO also saying demand for the Hopper architecture, a strong H-200 offering, grew significantly in the quarter. Blackwell production shipments are scheduled, again, to begin in the fourth quarter of fiscal 2025 and will continue to ramp in fiscal 2026. So again,

that was a lot. A lot of this was riding on the Blackwell shipments. A lot of people were on the street was anticipating shipments to really ramp up in the end of next year, their fiscal year. So that's exactly what she's reiterating. Again, Blackwell production shipments are scheduled to begin in the fourth quarter of fiscal 2025 and will continue to ramp in 2026. So you can see SOC did drop initially, but still almost 1% lower at the moment, slightly below the whisper number. But the guidance was a beat for NVIDIA in the January quarter. Christina, thank you. Patrick, I know I just interrupted you. I'm going to go back to you to finish your thought and also react to some of the guidance numbers we got.

We also got Q4 non-gap gross margin. It looks like 73.5 percent, which is basically in line, slightly better than street expectations as well. But the Blackwell shipment guidance, what do you make of that? I mean, it's positive, but I also want to reinforce that it's small. The clear majority of what the company is shipping now and in the next quarter is Hopper. And you're going to see a gradual ramp from Hopper to Blackwell. And, you know, the company had a couple of things it needed to show.

It needed to show that gross margins weren't impacted. Essentially, you have a different architecture that could have weighed on that. But then again, it could have been made up by market expansion, the entry into networking. What I'm seeing from my industry analyst perspective is all positive, all expected. Every hyperscaler that I talk to cannot get enough of these chips quickly enough. TSMC is sold out for the next year and a half. That gives pricing pressure, sorry, that gives pricing power to NVIDIA. I just don't see how they lose. Mike Santoli, I want to get you back in here. The gross margin guide for the fiscal fourth quarter from NVIDIA, 73.25 plus or minus 50 basis points. And sure, the top line guide is a modest B, kind of in line, but I can't help but couple that

with this Snowflake report and the ambition behind it, right? Because all of that data flowing into the transformed data center is part of what ends up feeding AI. So that, in a way, is positive pipeline indication, demand indication for the likes of NVIDIA, no? I mean, obviously, directionally, it is. I think it's kind of remarkable that we're slicing it so thin in terms of, you know, what's been guided in a quarter that's, you know, already a few weeks old. And just shows you again how how the tight tolerances of how this stock has has come into this number. I do find it interesting. Pretty minimal movements. The winners initially on the reflex are the sellers of all those juiced options that were implying an 8 percent move. That could change. No doubt on the on the call.

There's going to be a lot of big picture bullishness. The mission is not yet complete. We're going up and away. But I do find it interesting that that initial little sell-off attempt was bought. So a lot of jockeying and a lot of people really, it's the machines fighting each other over small increments of near-term guidance. I'm interested to see if you get it fleshed out in terms of, you know, through next year and what they're seeing so that somebody can make a more coherent fundamental case. Okay. I want to get back to Christina Parts-Nevels for more from this report. Yeah. The CFO commentary is on the website right now, and there's a line that really stood out.

Both Hopper and Blackwell systems, those are the two iterations of the GPUs, have certain supply constraints. And the demand for Blackwell, that's the latest iteration, is expected to exceed supply for several quarters in fiscal 2026. So that's a warning right there that supply is still going to be constrained for several quarters. We still don't know if that's going to mean a push out or any delays. But to me, that sounds like a warning, possibly to why you're seeing this movement downwards for the stock guys. All right, Christina, thank you. And shares are down about three percent right now, but bouncing around, as you can see right there on your screen. Paul, I want to get your reaction to everything we've just heard in this report, including the fact that demand is outpacing supply.

We knew that was a dynamic and it sounds like it continues. Yeah, I mean, it's pretty incredible that the company is raised guidance by, you know, half a billion dollars. And that's disappointing. But it just goes to show you how strong this stock has been. I mean, they've routinely raised guidance by closer to two billion or a billion or more. So this it's short. And I think to what Mike was saying earlier, maybe the reason the stock isn't down more on that marginal, you know, revenue guide higher is the fact that it hasn't done anything in five months. It's basically right where it was five months ago. So it has had some time to, you know, rest, so to speak, and, you know, let the market catch up with it.

And got to keep in mind, of course, we're also expecting a new platform from them pretty much every year. So there is that. Paul, Patrick, thanks for joining us. Mike, see you in a bit. Up next, much more reaction to NVIDIA's quarterly results. D.A. Davidson's Gil Loria, who is one of the few analysts on Wall Street without a buy rating on the name, is going to join us with his first take on the numbers.

And later, NYU's Dean of Valuation, Aswath Damodaran, explains why he loves NVIDIA, but not as an investment at current levels. Be right back. Welcome back to Overtime. Shares of NVIDIA lower by about 3% ahead of the earnings call, but off the worst levels of overtime.

And joining us now on set to break down the results, DA Davidson Managing Director Gil Loria. Got a whole rating on NVIDIA. That's special. Gil, welcome. So it looks like to me, NVIDIA could be getting gradually less expensive here, given that the stock hasn't gone up, but they did, even though maybe slightly, outperform on some key metrics. Hyperscalers are continuing to buy these chips. And then Snowflake Plus Anthropic and Snowflake's strength here and its results. Doesn't that present a demand creation moment for NVIDIA? Absolutely, it does.

I mean, these are remarkable results as they have been reporting for the last six or seven quarters. I think the reaction in the aftermarket is, hey, they need to do this at least five or six more times to justify the current valuation. If you think about the bull case here, and you've heard that many times today, it's that they can do $5 of earnings in 2026 and trade at 35 times that. That's $175. That's the bull case. If they miss on any of those massive hurdle raises that they have for the next five or six quarters, the stock could be half of that. That's the challenge investors have to balance is that there's a lot of things that can go wrong. Right now, though, the demand is fantastic. Let me play Jensen's advocate here. The likelihood of them missing seems pretty low when you look at what looks like stability of hyperscaler demand and the overall software demand pouring in.

Microsoft at Ignite is just making the argument that people do want its AI offerings. They're continuing to spend on this stuff. So five or six quarters from now might be too late to get up off a hold rating. When do you do it? Well, so consensus estimates are that NVIDIA is going to grow 50% next year. That means all those hyperscalers need to increase their already very high levels of capex by 50% or more. And they've been talking about, Sundar Pichai talked about overinvestment. Satya Nadella, to you yesterday, talked about bringing a catching up on investment.

Those are not terms you use when you intend to continue to invest like that forever. Those are terms you use when there's a point where you're going to push the brakes. And if that happens next year and NVIDIA has to guide to down results at any point next year, that's something investors need to be aware of.

But Gil, we're looking at data center revenue that's up 112% year on year this quarter. It's another record. And right there in the release, you have Jensen Huang talking about, you know, basically the stack, about what this is going to mean for compute. We know inferencing is a big part of the story here. Software, partnerships, it's more than just the picks and shovels themselves in terms of the long-term trajectory for NVIDIA. So how much does that need to factor in? Well, so I'm glad you brought up

the picks and shovels analogy because NVIDIA is selling picks and shovels. Microsoft, Amazon, Google are renting them out, but people actually need to find gold. They are not finding nearly enough gold to justify the levels of investment the hyperscalers are currently making. By our calculation, by the end of this year, Microsoft will have invested $80 billion in AI.

Now, they'll have a $10 billion AI business from that, but it's still probably a money-losing business. And if Microsoft continues to increase spend, especially if it increases spend by another 50% next year, it's going to be that much harder to get a return on investment unless their customers start finding a whole lot more gold. So if you have a hold on NVIDIA and who's finding gold is sort of up for grabs right now, where do you invest? Especially when we talk about all of this spending that's happening from the hyperscalers and others, and then the halo effect of NVIDIA through that process when you think about supply chain and this demand versus supply picture. Well, there is some gold being found. I don't want to say there isn't any.

And again, you mentioned Snowflake earlier. They're finding some gold. That's encouraging. We want to see more of that. But the company that's really finding the most gold is Meta. Meta is buying these massive data centers with NVIDIA GPUs, and they're turning it into a way to sell more ads, to sell ads for more money. And they're growing their core business faster based on this. They're the ones that are finding gold. And that makes them the best investment of the mega caps in the growth of AI. Wildcard here, another open AI moment, right? Either from open AI or somebody else that juices investors' ideas about what valuation should be. That's exactly right. If open AI comes in the next few months with a model that's

exponentially better than the last model and shows that compute is still scaling, that these models are still scaling with compute, that's a game changer. It'll be a game changer for everybody, and we hope that happens. If it doesn't, and there's some signs that you've been talking about that it might not, there's going to be a letdown. And all that capacity that Sam Altman is asking for from Microsoft and others, they may not give it to him because if he doesn't show results towards superintelligence, towards AGI, towards this omnipotent tool, he may not get more capacity. That's when you may see some hyperscalers putting the brakes on. Well, I'm glad I don't have to put ratings on these things. get more capacity, that's when you may see some hyperscalers putting the brakes on.

Well, I'm glad I don't have to put ratings on these things. Gil Loria, brave man being an outlier. Thanks for being with us on Overtime. Thank you, John. Well, up next, NYU finance professor Aswath Damodaran weighs in on the valuation of NVIDIA and other big tech names right now. And another check here on two other key movers this hour. Snowflake jumping after beating on EPS and revenue and giving strong guidance. Those shares are now up more than 16%. And Palo Alto moving in the other direction. That's lower despite beating on the top and bottom lines. Also announcing a two-for-one stock split that's effective December 16th.

Those shares are down 5%. Stay with us. Welcome back. Shares of NVIDIA are trading lower after reporting a beat for the third quarter. Joining us now is Aswath Damodaran. He is a professor of finance and he's known as the dean of valuation at the NYU Stern School of Business. He is also an NVIDIA shareholder. Professor, it's great to have you on. Do you want to get your initial reaction to these results and what it means for the valuation of NVIDIA, even as revenue has almost doubled since a year ago? That's a scary thought, right? I mean, you deliver a 94% growth in revenue, 75% gross margins, 62% operating margin.

That's an amazing company. You lose 4% of your market value. It tells you how much the expectations came on NVIDIA has been ramped up. They don't just have to beat analyst assessment. They've got to beat them by 10%. And I think investors are also increasingly focused on the guidance that NVIDIA is offering. And the negative reaction, I think, is coming from the sobering of that guidance, which is I think NVIDIA is trying to bring investors down for a soft landing, bringing expectations down. But it's going to be painful. Every earnings report,

you're going to see more of this phenomenon play out of them beating the numbers, but still seeing the stock price go down. How much of this phenomenon around NVIDIA stock is company specific with investors versus a reflection of more risk on appetite in the market, more liquidity coming into the market and investors just being more excited about big growth stories in general? It's not an or, it's both. The fact that investors are feeling good about stocks, that equity risk premiums are down, that they feel that they can buy stocks at a higher price is helping. But I think a great deal of this is company specific. I mean, you add $2.2 trillion in market cap over the course of a year. I mean, that's mind blowing in terms of the additional market cap created. I do think, though, that there's a disconnect

emerging here between what companies are spending on the architecture of AI. I do think, though, that there's a disconnect emerging here between what companies are spending on the architecture of AI, and I think your previous guest mentioned it, and the revenues you're actually generating from AI products and services. And that's going to increasingly come into focus in future quarters. Aswath, here's my pushback on this, because, you know, it's my job. Somebody's got to. This reminds me in a way of the argument against buying Apple in 2018. Oh, well, there's Samsung out there. Well, how many more people can you sell a phone this expensive? Margins have to eventually come down. But it's up something like four X, you know, above the high levels of that year. At what point can you, and I mean you specifically, buy a stock like NVIDIA after it's been on the run that it's been on under the idea that it's just

so unique it can go much higher still? No, I think that it is unique. It is in a market where it controls the market. The problem is the market itself might be hitting a stress point because if you don't get there, I mean, ultimately, NVIDIA's revenues are cost to some of the companies. So those costs have to be covered with products and services

that those companies sell. And right now, at least from what I'm hearing from those companies, delivering on AI products and services is turning out to be more difficult than they thought. And that's going to eventually have to show up in them buying fewer chips.

So my question, though, is what would it take? What kinds of evidence in the market would it take for you to believe, despite all of that and the idea that there are cheaper AI plays out there, this one is so special, even though it looks expensive based on what's expected in the next couple quarters, that it's still worth buying, even though you bought so much of it when it was a lot cheaper. I think at this price, if you're buying, you're expecting the AI chip product and service market to be much bigger than people are anticipating it to be. And you've got to be clear that that's what you're buying based on. I mean, even if you give NVIDIA dominance of the AI chip market, which I think they have right now, and maintaining these

sky-high margins, you can't get to 144 without something additional happening. So it's almost like you're buying into another market out there that NVIDIA can find and dominate. And that's a tough call. Do you think this speaks to the conversation we're having right now, all the hype we've seen going into AI? Is this helping to propel this broader rotation that we're seeing into other parts of the market, like cyclicals, like small caps? Keep talking about it as a Trump trade, but is it also just the fact that the AI trade needs to take a breather? No, I think it does have to take a pause because I think we've overreached on the AI trade because I think we still need to see whether it can be monetized. I see AI on almost everything I buy now.

I'm not paying for any of the stuff that I'm getting as free AI. The test will be when my email starts charging me $3 extra per month to use an AI feature. Am I willing to pay those extra $3? That's going to be the test for the AI product and service market is whether people are willing to pay. And for that to happen, AI's got to do something you can't do right now that is unique and special. And I think that's what we're struggling with. What about Microsoft charging $30 extra for 365 with AI built in and arguing this week that people are re-upping and buying more? That would be the first test. I think Microsoft is the company among the big tech that's closest to monetizing AI.

And I think it'll be interesting to see how much money they make from that subscription model. I'll be interested to see what percentage. I have Office 365. I have no desire to pay an extra $30 for AI, but I'm sure there'll be other people who will. All right. Aswath Damodaran, thank you so much. Well, up next, much more on NVIDIA's results when Mike Santoli looks at how that red hot stock compares to some of this year's hottest speculative plays. And William Sonoma, the NVIDIA cookware having its best day ever, closing at a new high. The high end kitchenware and home furnishings retailer beating earnings estimates, raising its full year guidance.

The company's CEO is going to discuss those earnings exclusively coming up 6 p.m. on Mad Money. We'll be right back. Welcome back. Mike Santoli is back with another look at NVIDIA and how it compares to Bitcoin's breakout to record highs. Mike. Yeah, Morgan, not too many major assets you can compare with the magnitude of the run that NVIDIA has had. But for a while, and I pointed this out at the time, it was really tracking with Bitcoin, actually from the middle of last year until about the spring of this year, really in lockstep. And then NVIDIA just took flight from there. The earnings estimates and revenue guides was just ramping so fast from there for NVIDIA. It carried it higher. Bitcoin was capped kind of around its old highs from a couple of years before until this recent break.

So in this context, it looks like Bitcoin is making some kind of a catch up move. There's no inherent reason these things ought to move together, except that they kind of feed off of the related pools of people are very kind of creating the future minded and also a little bit of a hot money aspect to it and momentum as well. Now, take a look at micro strategy shares relative to NVIDIA on a fiveyear scale, because, of course, it was not even a contest until recently. Now, MicroStrategy naturally is trading as a leveraged version of Bitcoin because that's basically what it is. It's raising money from the capital markets, putting it in Bitcoin.

But at this point, MicroStrategy now exceeds a $100 billion market cap, multiples of the value of the Bitcoin on its balance sheet. So, obviously, it's kind of taken on a bit of a life of its own. Yes, there's a rationale to it, but I get nervous when I see vertical charts. Morgan. It is a vertical chart. I mean, it's doubled, almost doubled month to date. It's up 650 percent since the start of the year. It's up more than 800 percent micro strategy over the past 12 months. And it's worth highlighting that as we have seen this breakout in Bitcoin, it's yes, it's considered it's considered a Trump trade,

but it's more than that. It's also a micro strategy trade in of itself because we're talking about a record forty two billion dollar self-offering. We're talking about a company that's going to market joined us on overtime last week and said basically they're going to gobble up 3% of the available supply of Bitcoin. And that in and of itself is repelling the cryptocurrency. No, it is. But it also means that if they state that intent of being a bidder for that quantity and the price of Bitcoin keeps going up, you know, you're kind of buying higher the cost basis of the Bitcoin you own is on the books. I realize they believe they're playing this multi-year decade game. But it is fascinating how very suddenly it got spring loaded in terms of the public wanting this this stock as a way to play. And then other companies that even hint at trying to follow a similar strategy.

A lot of them trading for single digits starting to join the party as well. All right. Mike Santoli, thank you as always. Well, mind the gap. Up next, all tomorrow's earnings that need to be on your radar, including GAC and several other big retailers. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back to Overtime Tomorrow. Another big day for earnings.

Deere, Baidu, BJ's Wholesale, Shoe Carnival, and Warner Music Group all report before the bell. And in overtime, we'll break down results from Gap, Ross Stores, NetApp, Intuit, and Elastic. We're going to hear from the CEOs of both Intuit and Elastic before they dialed into their analyst calls. And we'll also hear from the CEO of Snowflake as that stock rockets higher near the highs of the overtime session, up about 19 percent on strong results and guidance, Morgan. Yeah, it's going to be another busy hour. In the meantime, very focused on AI in the comments we're going to get from Jensen Huang and others on that call. One of the other pieces of this, and we don't know the answer yet, obviously,

is going to be what a Trump administration is going to mean for a company like NVIDIA. On the one hand, if you see more tariffs, more trade constraints where China is concerned, how is that going to impact NVIDIA other semiconductors on the other side of that especially as huang in the release is talking about among other things sovereign ai whether this is an administration that could potentially green light and lift those export restrictions of the most high highly technical highly capable ai related chips and products to places like the Middle East. We'll have to see. That is true. I can't help, though, but want to tell investors, remind investors, we kind of have to think beyond any individual administration when it comes to longer term

technology trends. I met with Brian Armstrong, CEO of Coinbase, about nine years ago in San Francisco. He was showing me how his app worked. He gave me a dollar worth of Bitcoin, right? I like to look at that to gauge how far it's come since. That dollar is now worth $325, right? And so you think AI, is it worth it? Is Bitcoin worth it? Well, there are some possibilities there. What do you believe, Morgan, about where this goes? We're going to have to see. We're also going to have to see what we hear on the call with NVIDIA. We have seen some semi-stocks trading slightly lower in sympathy,

but not some of the big moves we've seen in the past. For sure. We'll watch. Yeah, that's going to do it for overtime.