Nvidia's AI Earnings Test Tech Resilience & Investor Sentiment

Good Morning Investors,

Markets are digesting Nvidia's latest earnings as the final Magnificent Seven report this season sets the tone for Q3. The AI chipmaker delivered another blowout quarter with $46.74B in revenue (+56% YoY) and authorized a massive $60B buyback, yet shares fell 3% after-hours as investors focused on data center revenue missing estimates and cautious China commentary.

While futures show muted action this morning, the underlying AI infrastructure buildout story remains intact, with several analysts raising price targets and reaffirming that we're still in the early innings of a multi-trillion dollar transformation. The market's reaction underscores how when you're priced for perfection, every nuance matters, but the fundamental thesis of AI-driven enterprise spending continues to play out across multiple sectors.

US stock futures are mixed following Nvidia's ($NVDA ( ▼ 0.04% )) after-hours results. S&P 500 ($SPY ( ▼ 0.26% )) futures trade just below flat, Nasdaq 100 ($QQQ ( ▼ 0.38% )) futures are down 0.1%, and Dow ($DIA ( ▼ 0.53% )) futures are up 0.1% as investors parse through the chipmaker's guidance and China commentary.

European markets reversed earlier gains, with Pernod Ricard's earnings boost unable to sustain broader momentum. Japan's Nikkei closed higher, buoyed by AI supplier Advantest and news that Warren Buffett increased his stakes in Japanese trading houses Mitsubishi Corp (to 10.23% from 9.74%) and Mitsui & Co through Berkshire Hathaway.

Gold holds firm on a softer dollar and rate cut expectations, while oil eases as Russian Druzhba pipeline flows resume and demand concerns persist. Today's economic calendar features the second GDP estimate, jobless claims, and pending home sales data.

The market continues shrugging off political turbulence around Fed independence after President Trump's attempt to fire Governor Lisa Cook. While the immediate alignment between markets, the Fed, and the White House on rate cuts has muted volatility, Citigroup strategists warn of longer-term risks, recommending bets against the dollar and long-term bonds amid concerns over reduced Fed credibility.

Corporate America's buyback machine hit $1 trillion for the year at record pace, with Apple, Alphabet, and JPMorgan leading the charge. Announced programs could reach $1.3 trillion by year-end, providing roughly $4.4 billion per day in net equity demand according to Citadel's Scott Rubner. However, this tailwind will diminish during the mid-September blackout period.

Meanwhile, Google Cloud entered the blockchain race with its Universal Ledger project, offering financial institutions a neutral, permissioned Python-based smart contract platform. Early partnerships with CME Group and pilots in wholesale payments signal strategic intent despite skepticism over decentralization.

Nvidia delivered another exceptional quarter, beating on both EPS ($1.05 vs. $1.01 estimated) and revenue ($46.74B vs. $46.06B estimated, +56% YoY). The company authorized an additional $60 billion in buybacks, one of the largest authorizations in corporate history.

Key metrics:

Q3 Guidance: $54B ± 2% (vs. $53.1B consensus), notably excluding potential China H20 shipments

The stock fell 3% after-hours despite the beat, as investors focused on data center revenue missing estimates for the second straight quarter and cautious China commentary. CEO Jensen Huang dismissed concerns about an end to AI spending, projecting $3-4 trillion in AI infrastructure investment by decade's end.

Since ChatGPT's launch, Nvidia's share price is up ~964% while forward earnings estimates jumped ~1,100%. Critically, the forward P/E has compressed from ~70x in 2022 to ~33x today -earnings growth has outpaced price gains, undermining bubble narratives.

Snowflake ($SNOW ( ▲ 1.77% )) surged 13% after crossing the $1B revenue threshold with $1.14B (+32% YoY), EPS of $0.38 (+$0.11 beat), and raised FY26 product revenue guidance to $4.40B. The company added 451 customers and now has 654 clients generating over $1M in trailing 12-month product revenue (+30% YoY). Remaining performance obligations hit $6.9B (+33% YoY), signaling strong enterprise AI adoption.

CrowdStrike ($CRWD ( ▲ 1.54% )) delivered across the board with EPS of $0.93 (vs. $0.83 est) and revenue of $1.17B (vs. $1.15B est, +21% YoY). The company posted record $221M in net new ARR and $284M in free cash flow. However, softer Q3 guidance of $1.208-1.218B (vs. $1.23B consensus) sent shares down 6% after-hours despite management citing "reacceleration a quarter ahead of expectations."

Best Buy ($BBY ( ▼ 0.91% )) topped Q2 expectations with EPS of $1.28 (vs. $1.21 est) and revenue of $9.44B (vs. $9.24B est), but maintained full-year guidance citing tariff uncertainty. Comparable sales rose 1.6% as the retailer benefits from its new third-party marketplace launch.

Dick's Sporting Goods ($DKS ( ▼ 0.04% )) raised full-year guidance after posting 5% comparable sales growth (vs. 3.2% est) and EPS of $4.38 (vs. $4.32 est). The company expects comps to grow 2%-3.5% (up from 1%-3%) as it prepares to close its $2.4B Foot Locker acquisition next month.

HP Inc ($HPQ ( ▼ 0.05% )) beat Q3 revenue estimates at $13.93B (vs. $13.70B est) driven by AI PC adoption and Windows 11 upgrades. Personal systems revenue grew 6% to $9.93B, though printing revenue fell 4% to $4B.

American Bitcoin, backed by Trump sons Donald Jr. and Eric, secured funding for an all-stock merger to begin Nasdaq trading in September, targeting the growing intersection of crypto and political influence.

Boeing is seeking EU approval to acquire Spirit AeroSystems for $4.7B, with the European Commission expected to decide by September 30. The deal would bring the troubled supplier back under Boeing's control.

BlackRock pushed back against political pressure from both parties in an unusual memo to 43 state officials, with head of state affairs S. Jane Moffat warning about the "concerning trend of politicizing public pension fund management."

General Electric Aerospace faces a strike by 600+ UAW workers at Ohio and Kentucky facilities after contract negotiations failed. The Evendale plant builds marine and industrial engines for the U.S. Navy, while Erlanger supplies parts to engine plants.

Eli Lilly temporarily paused UK shipments of weight-loss drug Mounjaro ahead of a September price hike, implementing allocation systems to manage supply and prevent inappropriate stockpiling.

Upgrades:

Downgrades:

Bitcoin edged 1.8% higher in the last 24 hours but remains nearly 10% below its recent $124,000+ record high following the weekend flash crash. Ethereum slipped 0.2% while Solana broke through the $210 resistance level, with potential for a $250 test if it clears $220. The American Bitcoin IPO story adds another layer to crypto's political narrative. I remain bullish on the sector.

08:30 - GDP Q2 2nd Estimate (3.1% exp vs. 3.0% prior); Initial Jobless Claims (230K exp vs. 235K prior)

10:00 - Pending Home Sales July (-0.1% exp vs. -0.8% prior) 11:00 - KC Fed Manufacturing Index (August)

Earnings: Autodesk, Best Buy, Brown-Forman, Dell, Hormel, Ulta Beauty

Nvidia's report underscores that when you're priced for perfection, every nuance matters, but the AI infrastructure buildout remains in its early innings. The compression from 70x to 33x forward P/E shows this is still an earnings-led story, not speculative froth.

More importantly, the bull market is broadening. Equal-weight S&P 500 is approaching new highs, small and mid-caps show relative strength, and rate-sensitive sectors are catching bids. With corporate buybacks providing $4.4B daily in equity demand and a potentially weaker dollar opening doors for international assets, we could see a multi-asset rally extend into 2026 - one where leadership rotates but the underlying trend stays firmly upward.

Within this landscape, I continue to believe cybersecurity and software remain compelling investment themes. While I still favor Palo Alto Networks for its comprehensive platform approach, CrowdStrike's post-earnings weakness presents a potential opportunity to add a best-in-class name at lower prices for patient investors. The underlying digital transformation and security spending trends remain robust regardless of quarterly guidance fluctuations.

I maintain my bullish stance on the IGV software ETF, which I highlighted as a buy in the 70s and 80s and now trades at $107. The ETF provides diversified exposure to enterprise software leaders that should benefit from AI adoption, cloud migration, and digital workflow modernization, themes that transcend any single company's quarterly performance.

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Dan Sheehan

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This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.