All Eyes on Nvidia Earnings and Digging in on Retail Results 8/28/24

0:00John, thank you very much. Live from the NASDAQ market site in Times Square. This is fast money. And here is what is on tap tonight. NVIDIA in focus. What else? Shares of the chip giant solidly lower after its latest results. The impact that's having on the chip space and the broader market straight ahead, down 4%. And retail on sale, shares of Abercrombie and Foot Locker sinking after their latest earnings. But is the recent drop in consumer stocks an opportunity to get into some of these names? We'll debate that and tell you which ones if so. Plus, a super slump for super micro. Bitcoin breaks back below the key 60 ,000 mark.

0:39And Berkshire Hathaway hits a major milestone. We got all the details this hour. Good evening, everybody. I'm Tyler Matheson. In tonight for Melissa Lee, coming to you live from Studio B at the NASDAQ market site. On the desk tonight, Steve Grasso, Bono and Eisen, Dan Nathan, and Guy Adami. It's a boy band edition of Fast Money. All right. We start with the most important earnings report of the quarter. It's not NSYNC. It's NVIDIA. You got it. As much as 8 percent. Despite beating estimates, the chipmaker also authorizing a 50 billion dollar buyback. Not really all that big, I guess, in a trillion dollar plus company.

1:18The conference call kicked off at the top of the hour. Our Sima Moni has all of the details and we'll be monitoring the call. Hey, Sima. Hey, Tyler. So shares are falling here after NVIDIA's second quarter earnings beat estimates. Some questions around the Q3 grind. I would also point out that gross margins on a sequential basis decrease primarily driven by what the company says inventory provisions for low yielding Blackwell material and a higher mix of new products within data centers. Now, in an effort to quiet concerns around Blackwell's launch, NVIDIA's CFO Colette Kress says she expects to ship several billion dollars in Blackwell revenue in the fourth quarter with production expected to ramp in the fourth quarter and continue throughout into fiscal year 2026.

1:572026. We'll want more clarity from management, Tyler, on just how many chips are being shipped, so total volume, and how that compares to NVIDIA's current GPU on the market, Hopper. Conference call, as you just said, just started. We'll get you more commentary from CEO Jensen Wong. Okay. All right. Thanks very much, Seema. And let's trade it until we hear back from Seema on the conference call. Guy, kick us off. Well, if you're long volatility on the back of this, you're very disappointed because the market was expecting, I think, a 12 % move, and you see it year, not doing much of anything. I think there's something for everybody.

2:27I mean, people will point to the year over year revenue, which is staggering in terms of its growth. And then other people point to the sequential sort of flattening of margins, which I think is also pretty interesting. I've said it before, the magnitudes now, I think, of the raises in terms of revenue are getting smaller and smaller on an app, like just on a percentage basis. And at some point, the market's going to take notice. It's not an indictment of the company. I mean, obviously, the numbers are staggering. It's an indictment of the valuation. It's a law of big numbers, too. You can't keep adding revenue at that kind of rate, right?

2:59I mean, the rate they've been doing. Eventually, it's got to slow. Yeah. I mean, although they've done it for the better part of the past two years. Listen, I think Guy makes a good point. I mean, clearly, comms going forward are going to be a bit more challenging. But if you kind of look through some of the segments of the business, they really deliver. You talked about autonomous. You talked about gaming, clearly the focus was on data center, but they also delivered on some of those ancillary areas that were areas of concern. We're talking about gross margins, type of flattening, but just to keep in mind, we're still talking about 76, 77 % gross margin.

3:31So that is by no means a negative there. And then I do think the one thing that I would point to that would be a marginal negative is perhaps the concern around the Blackwell chip. They ship some samples and And then they're kind of, you know, tweaking the design a bit. And all those things speak to perhaps you might not be able to realize that revenue in the time frame that one would think. But across the board, again, this is the bar was quite high and they still managed to deliver, beat and race. All right. Dan, I want to get your overall thought here, but I'm posing in the form of a question that I asked another guest earlier today about NVIDIA.

4:07We know it has a lead. Does it have a moat? They do right now. And part of that is this CUDA software overlay to what they're doing here. So a lot of folks who are the buyers of these chips have gotten very embedded with this technology. It's going to work as an upgrade with Blackwell. I'll just say this about Blackwell. I mean, they're talking about Q4 shipments, maybe a few billion dollars. It's kind of a rounding error when you think of it at$120 billion in expected revenue this year. So we want to see how this thing ramps, if it gets pushed out a little bit. I'll just say this about the comps.

4:39Very difficult, as we suggested. We'll talk about the sequential increases that they're seeing in revenue growth. Like these guys said, it's getting smaller. But one thing that's really important last year, you know, in the Q2, they had 100 percent revenue growth year over year. And it kept on going higher to next quarter, up 200 percent, then 265 percent. So what's happening here is the exact opposite. Q1 this year was up 262. This this quarter was up 122. And then it's supposed to be 77 and 56. So the comps are really important here. I don't think valuation is that important if you're looking at the out year right now, because a lot of folks who are very bullish on this stock, they think they're going to continue to outperform.

5:16So the thing I would just mention is that, you know, it just didn't hit the whisper numbers on this quarter and the guidance. And so you could say that's a bit cautious, but they're not always solving to what the street expects. You know what I mean? There is consensus. They want to beat that. But they're not going to get in front of what they think, you know, the street or investors are certainly feeling about it. But so, again, with the stock up 150 percent, we're looking at this thing down 4 percent. It's a rounding error. So Dan says the company not only has lead, it's got a moat. Guy says the sequential revenue growth is coming.

5:46And you make the same point. And that investors and the valuation investors are eventually going to notice. What's going to take what is it going to take to make them notice? I think they've been too good. That's that's the headwind that they have. They've been too good. They've set the market too high. They set the bar too high for themselves. So Guy led off saying if you would have went back and said, how does it look now from this through this prism? It would be a stellar quarter maybe. Right. But now you look at it and you say, what have you done for me lately? And it's still knocking the cover off the ball.

6:18It's just not a point of reference or relative to where it's been. You could poke some holes in it. I don't think you could poke a big hole in it. Look at what it's doing after hours. It's slightly below the 50 day moving average. 120.66. We saw that push through, and then it just bounced up again. So there are people who, A, want to trade it, there are people who want to own it, and there are people who want to take this to the grave. They still have 85 % market share. Yeah. That's basically your moat and your lead, to Dan's point. So until someone really knocks them off, the Blackwell chip, they're going to have people who are going to take the Hopper chip, and they're going to fill in the blanks there.

6:58People have to wait for the premium. The premium name in the chip space is still NVIDIA. They still are on top of the hill. But things got a little bit ahead of themselves, as they always do with everything. I'll just say this. 85 % market share is not something that you can maintain ultimately in something like this. And when you talk about the gross margins, they were talking about 77 % gross margins a quarter ago. They came in at about 75%. That's what they're guiding to. So, again, it is theirs to lose. And you think about the SMH, the ETF that tracks the SOX. You know, you have NVIDIA making up 22 percent of that.

7:28You have Taiwan Semi that also has 85 percent of the market share making these chips. Right. And so you say to yourself, this Gen. I Gen. AI trade is really embedded in these two names. You have the hyperscalers, but they're really out underperforming since they reported earnings. And so if you don't see like a really sequential increase in their capex at some point, it is going to be decelerating. The whole sector is going to take a pause. So I'll just be very clear that there's nothing wrong with the quarter. There's nothing wrong with the guide. I wouldn't be buying it here. You know, the stock traded down to 90 bucks in August 5th.

8:01And I think that's your kind of bogey where it could go back down to. I don't mean tomorrow or anything. And that's back down, still above the 200-day moving average. But when you're looking at these technicals, algorithms have a way of finding these technicals in the marketplace. We saw that today. It was researching where it wanted to go to. Didn't get to the 100-day. Got to the 50 and broke it. Guy, what would you say? He said, I wouldn't buy it here. What would you say? I think you can win. I mean, think about the move we've had since that August 5th low. I think it actually traded$90 and changed that day and went from there, what did it rally?

8:31Almost 45 % over the course of the next few weeks, which is a staggering number on the back of what was a pretty precipitous drop from June 20th. So you're right effectively at the upper end of the range. I think you're going to get it at a better entry point, especially, you know, the broader market is showing some signs the VIX is picking up. If the broader market starts to sort of roll a little bit, NVIDIA is not going to be spared by that. I have one little tidbit here. Go. The buyback. When they announced the buyback a couple of months ago, I didn't think it was a growthy stock to do. I didn't think it was something that a growth stock should be doing.

9:03Look how long Apple took to buy back the stock. And Apple never had the valuation imbalance that an NVIDIA has. I always thought that was sort of the top. I was a little bit ahead on that in thinking because they blew out a couple of quarters right after it. But I'm also thinking that it still sort of sticks out in my head as a red flag. Why are you buying back stock? Yeah, when you're growing and your stock is appreciating the way it's been appreciated. All right, let's move on with more on NVIDIA and bring in Susquehanna's Chris Rowland. Chris, welcome. Let me get your initial impressions of the numbers that we've seen, of the guidance that we've heard, of the discussion that you've just been listening to.

9:43And then I'll follow up with a question. Yeah, I think the group nailed it. We have been used to big beats or at least one and a half to two billion on results and guide. And this was a little shy of that. So that is the market reaction here. I think the Blackwell delays were very well known. I don't think there's nothing there out of the ordinary. Nothing worrisome there. Nothing worrisome. No. And in fact, I look at this softer guide as perhaps a positive, because if Blackwell was in the October quarter, they would have beat handily. Why has the reaction been, this is not the question I intended to ask, and I'll get back to it in a moment.

10:29Why has the reaction been as kind of, I guess you'd say sort of moderate as it has been? Because the options markets were looking at 10 % plus possible moves. Yeah, I was surprised by that options paradigm. We would have taken the under on volatility. You'd have been right, right? Yes, but this report here is really all about that whisper being a tad shy. The gross margins are related to the Blackwell delay. They're nothing more than that. If I were to nitpick, maybe OCPEC's guidance was a little high, But that's it. This is much to do about nothing. So much. Here's my question. And it's for you first, but then really for the table.

11:17NVIDIA has become a historic stock, in my view. As I look back, I've been doing this 30 plus, almost 40 years now. Yeah. Yeah. I started in 1982. Come on. Yes, I did indeed. I did indeed. Anyhow, but Chris, let me come back to you. Is there a correlate historical stock that you can remember to NVIDIA in terms of growth, market share, dominance, appreciation? Is there one that comes quickly to mind and what happened to it? I mean, maybe Amazon in e-commerce or Google in search or Facebook in social. But to this extent, on the hardware around surrounding AI, I mean, NVIDIA is almost all of it. So those others would probably pale in comparison.

12:11All right, Chris, nitpicking. Free cash flow was a miss. But here's one that sticks out and just push back if I'm wrong. Operating expenses are expected to grow mid to upper 40 % range. Prior was low 40%. Is that the beginning of something? Because we've heard other companies start to go down this road, and the market is not like that. This has been happening since, I think, 2016, when I first saw NVIDIA demonstrate AI labeling cat pictures. AI is an enormous opportunity, and they're investing in front of that opportunity and in front of products that are going to be coming out five years from now.

12:53So I would expect OpEx to miss, you know, be worse for many, many quarters to come, in fact. Rowan, Ty just asked you about, like, any corollaries, right, that we've seen. And so what I keep hearing is it's different this time. And I go back to when I started the markets in 1997 and the excitement around the Internet and how it was going to change almost every single industry, this transformative technology. And that did happen. But there was obviously a bubble in the stock market. And when you think about the Nasdaq sold off 80 percent from its highs, I'm not suggesting that's going to happen.

13:27But go back to 2021 when there was excitement about the metaverse. It was Netflix. It was NVIDIA. It was, you know, a couple of other names. Oh, Meta and, you know, a few others that sold off 70 percent from their highs. Now, they weren't three trillion dollar market cap companies. But when you think about NVIDIA just sold off 35 percent from its highs in June to its lows in early August. I just think the idea that that couldn't happen again is very curious to me. So I'm just I want to ask you, like, what are your clients suggesting, you know, who are less bullish on this thing? Where could it go on smaller than expected beats and the potential for a hiccup?

14:01because we haven't seen a hiccup in this thing since 2021. The last time we upgraded NVIDIA, I think the stock was off 70 percent, 75 percent, something like that. So these things happen all the time. This is incredibly volatile stock, and I'll just leave it there. All right, Chris, thank you very much for your time tonight. And we're going to let you get back on the call. And I'm sure we'll have more time to discuss NVIDIA in the future. Meanwhile, a buzzkill on Supermicro dropping nearly 20 percent after delaying its 10K filing for fiscal 2024. Shares had been down as much as 28 percent, and they are falling again after hours.

14:41The AI darling saying it needs more time to assess its internal financial reporting controls. This a day after Hindenburg disclosed a short position in the stock, alleging accounting manipulation, sibling self-dealing and sanctions evasion. This is serious stuff. This is not just a chafing rash here. This is serious stuff we're talking about. Dan? Yeah, no doubt about it. I mean, Guy and I were talking about it earlier. There's not, you know, usually only one cockroach in the kitchen, right? And so when you think about what's going on here in the way this stock appreciated, you know, it got caught up in the hype.

15:15You know, we were talking about it yesterday, but we were also talking about it a few weeks ago when they reported the results. I mean, the decline that they had year over year in their gross margins from 17 percent to 11 percent and the competition that they have in Dell that has 22 percent gross margins. You say to yourself, OK, if these guys have been cooking the books and they've been doing some funky stuff, then maybe Dell, you know, has some issues, too. I don't mean accounting. I don't mean anything like that. I mean, as far as what the sort of demand for their servers are, because one of the accusations here is that they've been stuffing the channel to make their numbers.

15:48So if you have a main competitor that is stuffing the channel, that means there's less demand than you might expect. So to me, I just think that Dell roundtrip, nearly roundtrip that entire move over the last few months or so. We saw it in Micron. That puts the memory into these servers. So at the end of the day, we were just talking about NVIDIA. If you have this sort of deceleration and you don't have these beats that continue and these hyperscalers pair back at some point, which they will, the whole ecosystem is going to have a hard time. Bonwin? You know, anytime you have any whispers of accounting fraud, you worry.

16:20It's not a good thing. And I think in this market, we're talking about super volatile stocks. This one most certainly fits the bill. I think it's a situation where investors are most certainly going to sell, shoot first, and ask questions later. With that said, I do think there's an argument to be made that, you know, a lot of the issues around the operating code there really aren't what drives the stock and what drives investment in the stock. It's essentially a levered Bitcoin play. And we've also seen that particular asset come off substantially. So, you know, if you're looking for a way to play Bitcoin, I think, you know, this is probably where you look because it has an opcode behind it.

16:51But aside from that, I mean, I really don't think that it's a surprise at all that when you're hearing whispers of accounting fraud that the stock is off substantially, particularly a name that's known for volatile swings. Yeah. Yeah. Usually when you hear accounting fraud in association with a stock, it's the stock doesn't like it. Well, the people, the stock hates it. The stock hates it. The stock fills it. People like it. Investors hate it. Investors hate it. All right, we're going to take a quick break. Coming up, shares of Abercrombie & Fitch spiraling after earnings. Could this just be the beginning of big trouble for the consumer trade?

17:21We'll dive in with a top industry expert next. Plus, crowd strike higher after its first post-outage earnings report. The impact, the numbers, and more right after this.

17:42Welcome back to Fast Money. We've got another earnings alert, this one on CrowdStrike. Shares are up after the company beat on the top and bottom lines. First report since that global outage back in July. Steve Kovach has the very latest. Hi, Steve. Yeah, Tyler, maybe this one not as bad as fear. We're seeing those shares up, like you said, about 4 % following those beats in the top and bottom lines. But the more important thing, we also got new information on the financial impact from July's IT outage that it had on the company. CrowdStrike says it caused a two-cent hit to earnings per share.

18:13It also expects$30 million hit per quarter over the next two quarters. As for the top and bottom line results, these comparisons do not include the IT outage impact. EPS came in$1.04 versus the$0.97 adjusted Street was looking for. Revenue$964 million. Street wanted$958.6 million. As for guidance, CrowdStrike is cutting its full-year guidance, likely because of that expected subscription revenue hit from the IT outage over the next two quarters. Calls happening now. CEO George Kurtz did re-apologize for the outage. Also talking a little bit about how they plan to make good, but still more questions that we expect from analysts, especially over the fight between Delta and so many other customers, Tyler.

18:55All right, Steve, thanks very much. And let's go to the other Steve, Steve Grasso, to trade it a little bit. What do you say? So, you know, this is usually not where I'm at with accountability on this type of an instance here. But mark me if I'm wrong, and you follow this on a daily basis. I follow the stock. But has anyone gotten fired off of this? Has anyone, has there been any accountability? Because this was a$15 billion global hit. Yeah. And when you roll out something, you usually do a little bit of a test pilot. And this was a buggy rollout. This was buggy, buggy, buggy. When I was on the NYSE, they would come in late.

19:29They would do the rollout. They would do it with a certain amount of stocks. You don't do it with all the sectors, all the corporations that you're covering. I think it was such a buggy rollout that someone what's the accountability going forward? How are we going to change it going forward? I know they have an eight prong effect of how it's going to change. If I'm a shareholder, I'm always worried about this now. I don't see what happened, how it happened, but to look at a two cent hit to earnings when it was a$15 billion global hit, I think it's a reputational hit. It's a monetary hit. And when you look at the stock, it really didn't fight back to that 50 percent mark from where it was to where it got.

20:09So you're struggling here. You're rounding off a little bit here. I'd still be a little hesitant to jump back in there. And they do, Bonwin, seem to be saying that their future subscriptions are going to be impacted by this. They certainly are. I mean, let's make something clear. They're like, they're clearly best in class. They're clearly not practicing best practices. And the fact that you're only talking about a two to three cent hit and the stock is only up three, three and a half percent, I don't think investors are buying it. And there may be potential pain coming over. They do still have that looming lawsuit.

20:38So it's a company that I will be looking to get into lower. But I think there's more pain ahead. All right. Let's move on to an alert on Salesforce. Those shares popping on a top and bottom line beat. Let's bring in Julia Boorstin for the details. Hey, Julia. Hey, Tyler. Now, in addition to that top and bottom line beat, Salesforce raising its full year guidance to eight to nine percent year over year revenue growth. That is ahead of estimates on the earnings call just now. CEO Mark Benioff putting AI front and center, stressing the huge potential of a new initiative he's calling Agent Force. He says this will be the main focus at Dreamforce, which he called the largest AI event in the world.

21:16He said they'll showcase their new autonomous agents and how they are reimagining software for autonomous AI, saying that this will be transformational for their customers and for their business as well. The company also announcing that President and CFO Amy Weaver is stepping down from the role, but she will remain CFO until a successor is appointed and then will be an advisor to the company. Tyler. All right, Julia, thank you very much. And for more on Salesforce's latest quarter, catch the CEO, Mark Bennehoff, sitting down with Jim Cramer on Mad Money at the top of the hour. Guy, lead us off on Salesforce.

21:51Yeah, the nice bounce since the spring. I think the quarter's fine. I think the guide is not particularly great. I think the valuation is probably a little bit stretchable, not as expensive as it's been. However, if you think NVIDIA and those names could potentially go lower, Salesforce and the software names are going to win to that. So I think you have to look at it more through the lens of, okay, I think NVIDIA might trade back down. Maybe I should look to get into some of these software names. Salesforce wins. Short of that, I don't think there's anything all that exciting about the quarter.

22:20Yeah, I agree. I mean, slight beat on the current quarter, slight guide down on a couple metrics. And when I say a guide down, I mean really, really slight here. And going back to Guy's point about late May, when they report a huge gap, I think it went from 275 down to 220. It made up some of that ground over the next month, filled in that gap. Valuation's fine. It always trades at a premium to many of the other software names. We've talked about this on many occasions. I mean, enterprise software has really sat out this Gen AI rally. It has. And, you know, Mark Benioff, who's a great CEO, he was talking up last summer, you know, the opportunities that they had in Gen AI when they talk about this autonomous whatever the heck.

22:59I don't even know what it is. You know what I mean? I'm sure it's going to be great. I don't know if it's going to be autonomous right out of the gate. You know what I mean? And what we've seen from a lot of the software that Microsoft is using to power open AI or using open AI to power co-pilot. There's just not a lot of uptake right now. So, again, if you're waiting for an autonomous, you know, AI thingamajiggy, don't hold your breath. Quick, quick thought. Yeah, yeah. This is one of those type of things. It's a reflection of the economy right now. If the economy is rolling over, which I think it might be, you don't want to be here.