Antonio Bordunovi
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Nvidia guidance will be crucial for tech bulls. (0:25) Fed’s favorite inflation gauge looks more benign than CPI. (2:18) Warren Buffett assures investors on cash pile. (3:07)
The following is an abridged transcript:
This is test. For the next few sessions, the stock market will be conducting a test of the AI rally. This is only a test.
Will Nvidia (NASDAQ:NVDA) give the bulls a much-needed jolt of belief as macro worries gain a stronger grip on action? We’ll find out when the chipmaker reports earnings on Wednesday.
Analysts expect Nvidia to report EPS of $0.85 on revenue of $38.15 billion. There have been 6 upward analyst revisions to the bottom line going into the report, with 2 downward revisions. The top line has seen 7 upward revision and 2 to the downside.
Victor Dergunov, who runs The Financial Prophet Investing Group on Seeking Alpha, says the “top-line number will be especially important here, as the market will look for signs of continued growth, specifically in the lucrative enterprise AI GPU segment.”
“While Nvidia guided to only $37.5 billion in sales for Q4, Nvidia often sandbags its forecasts, making it easier to provide better-than-anticipated results,” so $38-to-$39 billion in sales with a small beat on profit wouldn’t be a surprise, he said.
Guidance will be crucial in the wake of DeepSeek, but despite high expectations, Nvidia can deliver “another constructive earnings report, which should support its stock price trajectory and the trajectory of other high-quality AI picks.”
KeyBanc Capital Markets are expecting a strong report that will “solidly beat” forecasts and provide higher, albeit conservative, guidance.DeepSeek’s recent announcement concerning its latest AI product has led to a spike in demand for Nvidia’s H20 GPUs in China, analysts added.
Shares of Nvidia are barely higher year to date, but are up 15% from their low at the beginning of this month.
Also on the earnings calendar:
Public Storage (PSA), Trip.com (TCOM), Zoom Communications (ZM) and SBA Communications (SBAC) report on Monday.
Home Depot (HD), Intuit (INTU), Workday (WDAY) and Keurig Dr Pepper (KDP) weigh in on Tuesday.
Joining Nvidia on Wednesday are Salesforce (CRM) Lowe’s (LOW), TJX (TJX) and Stellantis (STLA).
Thursday brings HP (HPQ), Rocket (RKT), Warner Bros. Discovery (WBD) and NetApp (NTAP).
EOG Resources (EOG), Chart Industries (GTLS) and AES (AES) issue numbers Friday.
On the economic front, the highlight of the week will be the Fed’s favorite inflation gauge, which is expected to show a more benign picture of price pressure than the January CPI.
The January core PCE index hits Friday and economists expect a 0.3% rise on the month, cutting the annual rate to 2.6%.
Wells Fargo economists say “inflation progress is slower going, but it hasn’t necessarily gone into reverse.”
David Rogal, lead portfolio manager of the BlackRock Total Return Fund says “we think the recent FOMC rate cuts were part of a ‘recalibration cycle,’ to adjust policy rates down with inflation, so as to not cause a passive tightening in monetary policy.”
“While the Fed’s easing bias remains, we think the central bank has transitioned to more of an extended hold, at a minimum through June, and potentially longer (absent any unforeseen shocks).”
In the news this weekend, Berkshire Hathaway (BRK.A) (BRK.B) reported a surge in Q4 operating earnings, delivering a full-year 27% jump to $47.44 billion. The company said Q4 operating earnings increased 71.3% Y/Y to $14.53 billion.
Berkshire’s cash pile swelled to a record $334.2 billion as of the end of last year, up from $325.21 billion as of September 30, 2024.
The cash has long been a focus for investors impatient for it to be put to work.
In his annual letter, Warren Buffett assured investors that Berkshire Hathaway’s equity holdings would always exceed its cash.
“Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities – mostly American equities, although many of these will have international operations of significance,” he wrote. “Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned.”
He also explained the company’s policy of not paying dividends to shareholders, preferring to reinvest the money into the company. Berkshire only paid a dividend once in the 60 years Buffett has controlled it. On Jan. 3, 1967, the company paid out $0.10 per A share.
“For sixty years, Berkshire shareholders endorsed continuous reinvestment and that enabled the company to build its taxable income,” Buffett said.
And speaking of dividends, Phillips 66 (PSX) will go ex-dividend on Monday, paying out on March 5.
S&P Global (SPGI) goes ex-dividend Wednesday and pays out on March 12.
Delta Air Lines (DAL) goes ex-dividend on Thursday, paying out on February 27.
And Goldman Sachs (GS) goes ex-dividend on Friday, with a March 28 payout date.
And in the Wall Street Research corner (and speaking of Goldman)
They are out with their Rising Stars list. Those are the stocks with the largest increase in the number of hedge fund owners from the third quarter to the fourth quarter of 2024.
Senior Strategist Ben Snider says stocks with the largest increase in number of hedge fund investors have historically outperformed their sector peers during the quarters that followed their rise in popularity.
At the top of the Rising Stars list are Disney (DIS) and Salesforce (CRM), both with 24 more hedge funds buying. Robinhood (HOOD) follows at 23 and Boeing (BA) at 20. Arthur J. Gallagher (AJG), Coupang (CPNG) and AppLovin (APP) are tied with 19.
Looking to Falling Stars, Micron (MU) saw 24 fewer hedge funds owning its stock. SS&C Tech (SSNC) followed, down 23. Premier (PINC) and e.l.f. Beauty (ELF) follow at 19.
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