Nvidia Earnings: An Apple moment or have analysts set it up to fail?

Uncover the Truth Behind the Bull Run: Dive into the frenzy driving today's stock market highs and discover if your investments are at risk.

Decode Nvidia's Earnings: Get an inside look at Nvidia's much-anticipated earnings report and what it means for the future of AI and your portfolio.

Learn from History's Investment Lessons: Explore how past market predictions can guide today's investment strategies and help you avoid costly mistakes.

Analysts Exposed: Find out how analysts' predictions might be inflating stock values and how to read between the lines.

Identify the Real Market Risks: Unravel the broader dangers lurking in the market, from interest rates to the banking sector, and learn how to protect your investments.

Disclosure: "At the time of this article I currently hold shares in some of the companies mentioned as part of investment portfolios in funds I manage for Belpointe. Additionally, I may discuss other securities that are under consideration for future investment; however, discussing these securities is not a recommendation to buy, sell, or hold. My mention of these securities reflects my personal opinion and analysis at this moment and may change without notice. Please remember that all investments involve risks, including the possible loss of

Transcript

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The challenge we all face is separating the fundamentals of our individual stocks and a near hysterical, bullish backdrop driving markets. Look, I get it. And admittedly, in the short run, maybe some stocks have run too far. But timing that exit, it matters. Being too early can cost just as much as being too late. Hence, you have a lot of market pundits, including some of the brightest money managers on the planet, trimming positions, looking for a correction. Some are going a step further, saying this market is no different than dot.com and that the party is going to come to a crashing halt. But timing, it does matter. You can be right on the call, but there comes a point when you are so early, you're just wrong. I was in the Bear camp in 1996 when Greenspan made his irrational exuberance speech. He was right, of course. But four years too early, from his December 5th, 1996 speech to the peak of Nasdaq in March 2000, the index went up another 290%. Now, admittedly, the Nasdaq is up 55% off the 2022 low. And if we go back to the COVID low of March 2020, it's a monster, 135%. Add the fact that some of the biggest companies are a multiple of those returns, investors have acrophobia. You're scared? Yeah. Who isn’t. With the single biggest earnings report Nvidia right in front of us. The potential for a highway pile up is high. Let's dig in. See what we're looking at. Welcome to the Money Runner. I'm David Nelson. Trimming positions after a big run. It's a no lose trade. It's also a trade without much conviction. We do it because we want to lock in victory. If the stock goes up, I'm smart because I still own some. And if it goes down, I'm still smart because I sold some. The downside is that you lose the compounding effect as the position grows and likely have a big tax bill. Nvidia, Look, I'm not telling you to buy it in front of the quarter, but I'm holding into this report. Nvidia is perhaps the most talked about stock of late, in part because it's up a staggering 239% last year and already up another 46% in just the first seven weeks of the year. I mention it because this company is about to report earnings on Wednesday after the close. It is likely to be the most important earnings report so far, in part because it is the brains of the A.I. Revolution, which many believe to be the most important investment theme in a generation. Other themes like a broadening of the rally into small caps. Well, that hasn't panned out yet. In that backdrop, capital flows to what's working from what isn't. If the party's about to end, analysts will likely be the cause. It's important to remember that an earnings report isn't just a peek into the financial health of a company. It's also a report card on how good or bad a job the analysts did in getting the numbers right. Analysts have been scrambling for weeks to raise numbers and targets after misjudging the demand. The last couple of prints from Nvidia would double digit top and bottom line beats. Analysts have been forced to more than double their targets since November last year. In fact, two have pushed the target up to 1000, with one analyst saying the stock's going to 1200. I get it. Irrational exuberance. The analysts are tripping over themselves, trying to outdo each other. How can Nvidia possibly match the enthusiasm of these analysts? The answer is they probably can't. If NVIDIA doesn't beat expectations in a meaningful fashion, the stock will be punished and the Bears will declare victory. Most, however, will not capitalize on the pullback and remain content with the position they own or happy to be out of the stock altogether. I have no idea what's going to happen on Wednesday, but I do know that Nvidia is going through an Apple moment. Most misjudge this company believing it is just a chip stock and the next chip that comes along a little faster will knock it from its throne. This is a platform company with an ecosystem that developers and engineers depend on. Yes, they develop the advanced chips, for the A.I. systems of the future, but they also develop the software and tools needed to manage this hardware. The Street will focus on lead times, hoping there's enough supply to meet demand, but not too much. That would force an inventory correction down the road. The biggest risk to this market? Trust me, it's not in video. It's not even big cap tech. The biggest risk is still elevated rates and the continued erosion of commercial real estate and the regional banking system. Recent inflation data was a little hotter than expected, pushing any hopes of a rate cut further out. In a vacuum. Many industries and stocks could deal with the tight financial conditions. That's not true in commercial real estate, where already many marquee office buildings are looking at 50% vacancies. This, in turn, translates to the regional banking system that holds the paper on these properties. No, they don't want to foreclose. And no, they don't want to take a big write down. So the industry extends and pretends. A year ago, we got a glimpse of just how quickly markets can react when Silicon Valley and Signature banks rolled over. A few weeks ago, New York Community Bank reported a quarterly loss due to higher provisions and was forced to slash its dividend. Dollars to donuts. We're going to find more roaches when we turn on the lights. The KRE Regional Bank ETF looks like it's bleeding to death. It's down 7% year to date with more than 30 of its members down double digits. The Fed then may continue to hold out, but if there is continued breakdown in some of these deposit institutions, they will be forced to act. All right. This is the part of the pod where I have to ask for your support and know it's not money. But if you like this episode, please hit subscribe. And if you'd like to learn more and have access to charts and other commentary, go to DCNelson123@substack.com Thanks for joining. I'm David Nelson.