Nvidia Beats Big and Surprises with a Stock Split and Dividend 5/22/24

0:02Live from the Nasdaq marketside in the heart of New York City's Times Square, this is Fast Money. Here's what's on tap tonight. Splitsville for NVIDIA. The company announcing a surprise 10 for one stock split alongside big beats on the top and the bottom lines. We've got full team coverage of the results and are bringing you all the trades. Plus, missing the target. Shares of the retailer sinking to nearly four month lows while rivals like TJX soar. Why can't the company seem to catch up to its competitors? And later, the chartmaster says Goldman Sachs is losing its shine. Pfizer soars on cost-cutting plans, and Starbucks notches its best day since last November.

0:36We're diving into all of today's fast money movers. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, Courtney Garcia, and look who's back for this hour, the Bitcoin baller himself, Brian B.K. Kelly. Great to have you back here. Great to be back. And we start off with the most anticipated earnings report of the season. NVIDIA shares at all-time highs after posting a top and bottom line beat for KeyOne. Guidance for the current quarter also coming in above expectations. The chip giant also announcing a 10-for-1 stock split and a dividend hike.

1:07The conference call just kicking off moments ago. Christina Parts of Nevelis is here to break down the quarter. Hey, Christina. Hi. Well, investors got what they wanted. Earnings beat, like you said, revenues actually matching buy-side expectations of$26 billion for Q1. Same for the Q2 revenue guide, came in at$28 billion. Even Q2 margins are expected to drop to mid-70s, exactly what the company had warned about in the previous call. So overall, the company's fundamentals still intact. You saw that with the beat in the numbers, but they do match buy side expectations, which is why you're not seeing as much of a stock reaction.

1:39Data center revenue, though, was the main driver. Record sales. You zoom out on the year and that shows data center revenues up four hundred and twenty seven percent. CEO Jensen Wong saying customers have moved beyond cloud service providers, which, by the way, contributed 40 percent to data center revenues. news, but now they have internet companies as customers, enterprise, sovereign AI, auto, as well as healthcare. The cherry on top, like you talked about, was the 10 for one stock split. Effective investors will actually get nine additional shares after market close on June 6th. The company also announcing its quarterly dividend by 150 % increase.

2:15All of this is talking about the company giving money back to the shareholders, employees, investors, et cetera. So a big beat, and then I'm going to get back on the call. Yeah, Christina, before you go, were you talking about revenues attributed to cloud data centers and it moving away, diversifying? Yes. So previously, the last quarter in Q4, 50 % of revenues came from cloud service providers. Now this quarter in the CFO commentary that is on their website, 40%. So you're seeing that number decrease. And instead, in the press release, Jensen Wang is saying that it's including now Internet companies, enterprise, sovereign AI, which they've talked about quite a bit, auto and health care.

2:54So they're getting more verticals, as they put it. Christina, thanks. Keep us posted on the call. Christina Parts Nevelis for us. So what do we make of this quarter if the stock is up 4 percent after hours? Karen. Yeah, so the bar was really high and they did a nice job of stepping over the bar. Jensen Wang, beside being just brilliant and building a company that is at the forefront of AI, is also really good at managing the street. That's sort of, I think he views that as the other part of his job. We haven't heard from him. He started at 5 o 'clock. The stock split, the dividend thing, I don't think it really matters, but the stock split, obviously, you could have now a whole host of other investors that have sort of been shut out.

3:33So he's doing a great job managing. Again, he's in the business of under-promise, over-deliver. and I really want to hear about what kind of demand he's seeing. That to me is, as soon as the earnings come out, they're irrelevant. We see it, we know the number, okay, did it beat, did it not? Okay, how does it look? What does the rest of the story look like? And the commentary in terms of the transition from Hopper, which is their current chip, to their new chip, which is, you know, will be on sale later this year, that's going to be key if there's Ray Blackwell, if there's going to be any sort of holding back in anticipation of the launch of that new chip.

4:06You know, she said the bar was cleared. I think this was a big fan of the show, a Dick Fosbury, in other words, of the Fosbury flop. This was no flop. But in other words, he he he got over a big bar. That was why he invented the flop. But NVIDIA, if you think about the 27 percent run into the numbers, if you think about the data center growth, if you think about where I think they actually are going to hit, they've guided on the 75 percent margin. So there's no there's no problem with that. What we've also heard throughout the last month and a half is that the hyperscalers are growing their CapEx 35 percent.

4:40It was only, you know, 8 percent or so last year. So this is the demand is there. Demand is there. And certainly the new segments. And as we get into other parts of the business, it is what we're hearing more about. It is about autos. It is about CPU. And so you want to know where that demand is coming from. You want to know where the entire platform allows them to kind of have this circular, you know, reinforced dynamic. I think I think it's all here. This to me is a huge relief for the market. And we'll get into that. But but I mean, the fact that, you know, four percent move, I think this stock split is very important, even though we all know means zero, except for it means something.

5:15Yeah. But I mean, listen, they go up. Right. That's exactly the point. So, I mean, when I go about an ice cream cone, they don't ask me, did you get this money from a stock split or not? They still take my dollars and it goes up. So what what does it matter? But I think in these earnings, right, if there's anything, any knock at all that you see in this, it's probably the gaming sector, which is a tiny, tiny little sector. And everything else is looking good. So I don't know what else you would want from this. It is a beat. Now, as the trader perspective, I want to see this thing trade up and close through 975 tomorrow, which it's doing now.

5:45But we still have the CEO to speak. And I want to see it close there at the end of the day. And that will give me a heck of a lot of confidence that the momentum is continuing higher. Yeah, and I think what's really important here was that demand story, right? Everybody thought that you were going to see a weakening in demand as we're waiting for Blackwell to come out. But they came out and said not only is demand strong, but demand is accelerating. And so I think it's going to be interesting to see what they say when they're speaking later. But I think that's very indicative that this has a lot of room to continue to run.

6:09Because as long as the demand is there, and it clearly is, that's absolutely going to benefit in NVIDIA. The implication, too, of revenues coming more away from data center is that all these other parts of business are, in fact, growing. I mean, that is sort of the tailwind that we are waiting for. It's not just the hyperscale. Other people, other enterprises are also investing in AI at the same pace. So you want to see that sort of go down the chain, so to speak, in terms of companies. And it will. And think about all the places where we invested in NVIDIA even before we knew what they were doing in AI.

6:40Or maybe we knew it. But, you know, and I would get into the industrial usage. And I think it's a really exciting place. It's where it gets exciting for other people, too. They're also known to be in the auto space for the chips. And, you know, you can talk about whoever it is, whether it's, you know, Qualcomm or. And you also think about the memory chips. And we've seen the move, of course, in the impact in, say, a micron, et cetera. So this supports the trade. That kind of commentary supports the entire trade that's broadening this market. And again, to me, this is a huge relief for people that wanted to hold in the market.

7:10We'll talk about FedMints in a little bit. But for people that wanted to buy NVIDIA and a lot of people still wanted to buy Weakness, they're happy that actually, you know, or people that just recently bought it. This is reinforcing the story. Just one other thing. So the top line was better. The gross margin was better. Also, their expenses were better. So a lot of great things going on at the same time. And, you know, the diversification you talked about in terms of who their customers, that's a really good thing. A lot of great things here. And it's giving a lift to a lot of the other AI players right now.

7:38The whole complex. Exactly. The whole complex. AMD is up. What is it? One percent right now. We also super micro hire. Dell. Dell. Your Dell. I like Dell. Well, thank you. We'll see. It's been good. It's trading higher. But this is validation that all these other plays and the concentric circles in terms of AI. It's not just the chip makers anymore, but there is enough to go on here for software, et cetera. Maybe now is the time where we'll see that sort of transfer. Right. And it's expanding even outside of tech. Right. So just after the closed News Corp now announced that they're going to have a deal with open AI.

8:08Right. Stocks up a couple percent there. So the theme of AI eating the world, changing every single business out there continues. use. And I think that's really good for the market because there was a lot of concern today with the market where it's been, with the expectations where they've been. We will talk about the FOMC, but that could have really derailed this market if there was even the slightest miss or even just kind of a baseline. Oh, it got there and it was OK. But this is this is what the market needed. So the question then arises, at what point do you start turning back on an NVIDIA and putting it into something else?

8:43If AI is in fact eating the world and we We are seeing proof of it, not just through NVIDIA's quarters, but through the earnings that we've already gotten so far this quarter. Yeah, and you definitely don't want to bet against an NVIDIA or AI. Like, it's absolutely a play you want to be in. But if you haven't made changes to your portfolio, you are going to be overexposed there. And I don't think it's a bad time to take some profits and add to other areas. So you're talking about all these other things that are going to benefit from AI. We haven't talked about the energy play. So you have things like coffer and energy, and that's like this whole other industry that is going to completely benefit from the structural changes in artificial intelligence.

9:15And it's a really good valuation to add here. So I am not getting out of it. But, yeah, taking some profits, taking advantage of these other opportunities, you absolutely want to look at that. Yeah, Dell reports, I think it is next week, actually. And Citi just had a very bullish note out yesterday saying that we're going to see Dell top estimates, even though they are very high right now. And the stock has virtually doubled so far this year. Yeah, I mean, and it's not crazy expensive. Now, a lot of things are converging at the same time for Dell. obviously this nvidia relationship storage servers but also you have enterprise spend coming back and and i think we're going to see a stronger pc quicker and stronger pc refresh than we have as they become ai native where the co-pilot you know a button is on it and so there's a lot of great things happening and i think they're just going to be generating a ton of cash yeah i think you have a case here where uh not only the the market dynamics are are reinforced but i think you you've given life to some of those industrial plays.

10:12This is only going to reinforce a margin story across it. I think if you think about what we wanted to hear from this company, first of all, there is still a lot to digest over the next couple of days. I think there are a lot of people that really were hoping that this was going to be a tough number. I think people wanted this opportunity to buy it weaker. And this is almost the event. I don't think people right now, again, the stocks move. This is almost a nonchalant move. It was a year ago when we really first started getting blown away by NVIDIA's numbers. And if you think about this move today, based upon those numbers, I think it's good news, not bad.

10:43I mean, one could almost make the argument that this move in the after-hour session is all stock split. I mean, you know, because if it's sort of, it stepped over the bar, you use the, who is that gentleman? Fosbury, Mr. Fosbury, Mr. Dick Fosbury. Dwight Jones here, Dwight Jones. He's watching right now. That doesn't speak to, you know, a blowout quarter here. Well, but if the bar is that high, that's my point. I mean, Dick Posbar, he got over some very high bars with a very unique style of doing the. He wore a black jacket and jeans everywhere he went. Yes. But I'll just say this about the multiple for NVIDIA relative to the market.

11:22It gets back to always on some level valuation. And I know these numbers are ones you can play around with with a stock that's moved this much. But NVIDIA is trading at about 1.7 times the S &P multiple, which is very cheap to its 10-year average. So, you know, it's not like it's really expensive. I would make that argument. Yeah, and if you have this type of growth, I think, again, you could probably trim some and talk about the other things you want to do. One more I would add in there is Apple, right? If they're going to refresh their phones and their computers with AI native, then that's going to be in a completely different story there.

11:54But, I mean, you know, again, Apple's up a bit. We're not the first people to discover this. I'd probably be a buyer Apple like around 180 on that news. All right. Let's get more on Nvidia with Chris Rolland, senior semiconductor analyst at Susquehanna. Chris, great to have you with us. What's your take on this quarter? What are the questions you still have in your mind for the conference call? Yeah, I think you guys covered it really well. This was just a little bit better than buy side expectations with that stock split for the retail crowd to get them going as well. Um, we are all as analysts focused on really the last two quarters of the year.

12:30And it's then this transition to B100 and GB200. That's really what matters here. These are really compelling products. From a price performance standpoint, they're super compelling. They're better than H100 and H200. From a power perspective, these guys are bringing in liquid cooling. So from an energy perspective, it's going to use less. And we're just worried about a potential little gap in Q3, Q4 for NVIDIA. That would be our biggest worry. And anything they would say on the call to alleviate that would be helpful. So the company in the press release tried to make the case that they're seeing demand actually accelerate despite this transition that's to come later on this year.

13:17You think, though, if there are any hiccups in terms of companies holding back and waiting for that Blackwell offering, that it won't happen until the second half? Yes, that's right. Right now, they're being helped by the H100 to H200 transition, where they get twice as much memory. will have B100 later in the year and any delays in the GH to a GB200 product in 2025, that would increase the probabilities of that kind of revenue gap that we're talking about. So that's how we're thinking about it. Chris, it's Karen. Thanks for being on. So what are you seeing for H200 pricing? And how do you think that evolves?

14:01How do you think that plays out as people look to switch later? Yeah, this is really all about memory and NVIDIA passing those margins, those memory margins on to their customer. For us, gross margins were good, perhaps a little bit light. Maybe they weren't able to pass on all of that memory cost up that we would have expected. Probably not in the 80 % range that they get for typical data center products. But so far, H200, the transition looks pretty good. Chris, talk about the broadening that we were talking about in terms of where this business is going, but obviously new sectors. By the way, sorry to interrupt.

14:42NVIDIA hitting$1 ,000 a share as we speak in the after hours. Go ahead. Makes for a nice even$100 on a 10 to 1 split. So, Chris, yeah. So talk about other sectors where, again, you know, maybe these were places in a past life we actually talked about with NVIDIA. But, you know, whether it is auto, whether it is, you know, CPU, whether it is what gets you excited here to look at the future? Yeah, and I think that's a little bit confusing because we've been so supply constrained that you would ultimately hit your largest and best customers first and then work down to the enterprise over time. So this is a broadening, but it may be more of a supply dynamic than a demand dynamic overall.

15:22But as we move forward here, things like Omniverse, things like, you know, enterprise, on-prem, AI, they're going to be more important and you will see a broadening overall. Just maybe not as quickly as this report, you know, kind of signifies. And Chris, in terms of the hiccup that you might be looking for, Q3, Q4 timeline as that transition to the Blackwell happens, is that something that you look through or is there a real stumbling block that NVIDIA could hit that would impair its business in any way? We would be looking through it. We think the GB200 products are incredible. These are basically, you know, full supercomputers connecting 576 GPUs into one single, like, holistic cluster.

16:12There's nothing else like that on the market. But we don't know if investors are going to look through it in the same way. I would imagine a hiccup in the stock price, you know, kind of correspondent with the numbers. Chris, great to get your take. Thanks so much. Chris Rolland of Susquehanna, who's got a$1 ,050 price target on the stock. He just moved it up recently. And, of course, the stock hitting$1 ,000 briefly in the after-hour session. What's your take on this price action? We seem to continue to get stronger. Very, very strong. I think Chris is going to have to take his price target up because we're going to be there before the end of the show.

16:48Another$50 is not that much. But, again, you know, if you talk about momentum, we talk about the different traders that are going to come in here, A breakout of this type of proportion is going to get a lot of people excited about it. Retail traders, momentum traders. And as long as we can hold these gains, I do think that momentum continues. And the retail trade, we've seen it. It can be powerful when it wants to be. And that's$100 a share. And not terribly discriminant on necessary valuation, which I think is fine. But also looking more at really the secular and the dynamics that I think this company and the place and the position it has both in their lives and in the concept of where we think the economy is going.

17:28I think this is a relief to buy for a lot of people that didn't own the stock. Actually, it's confirmation, and it gives you at least another runway of a quarter or two. And it might give us a little bit of confirmation for the market rally with the S &P ad records here. This was the last sort of test, right, for the rally here. We need an NVIDIA. I think you can exhale, and they did it. They delivered. Yep. All right. We'll, of course, keep you posted on the NVIDIA conference call, which is ongoing right now as shares hit$1 ,000 in the after-hours session. We've got a news alert here on Pfizer and Moderna.

17:59Seema Modi's got all the details. Seema. Melissa, the U.S. is in active conversations with mRNA vaccine makers Pfizer and Moderna on a potential vaccine for humans. That's according to a Reuters report, citing a call with the Department of Human and Health Services. It follows the CDC confirming a second human case of H5N1 bird flu tied to this dairy cow outbreak here in the U.S. A little bit of context from our pharma reporter Angelica Peoples. It's not clear at what level these talks are happening and how far they've progressed, but it's not uncommon, of course, for the government and the vaccine makers to have these conversations.

18:35It's happened a lot over the past couple of years. As we come out of COVID, we have reached out to both companies. We're looking at shares of Pfizer and Moderna higher in after hours. Melissa. All right, Seema, thanks. Seema Modi. We've got two holders of Pfizer here on the desk, long-suffering shareholders, but are seeing a lift in today's session on the back of cost-cutting news from Pfizer, but also in the after hours on this vaccine news. Avian flu, obviously it's not as, it won't be as pervasive, I would imagine, as COVID was during the pandemic, but this could help a little bit. Yeah, although, you know, as a Pfizer shareholder, I don't want to hear anything about Paxlovid or anything related to COVID vaccines because it's been an albatross.

19:12What was successful and what gave the company substantial windfall, which I think they aggressively reinvested in new pipeline. We just haven't determined what what's going to pay out of that pipeline yet. The cost cutting is interesting. Look, at some point you had to see some catalyst for the stock, which was taking a long time to bottom. This is incrementally good news. This after hours news doesn't mean a whole lot to me. The cost cutting, new cost cutting announcement on top of cost cutting that was announced at the end of last year. So that's it's an increase in that. Yeah. I mean, I like that they continue to find costs.

19:41I just wonder why didn't they find it last time? Like it's all the same. Yes. But, you know, the stock has really been so bad that I think, you know, Tim always says, would you make the most money when a stock goes from terrible to just bad? Is that right? So is it just bad now or is it like it's bad? It's still pretty terrible. It's terrible. It really has been, yeah, just terrible. I definitely don't think we want to, you know, hope for like a bird flu or something like that. That would like benefit them. So, yeah, I mean, hopefully it's something else. It's like they have a lot of cancer drugs in their pipelines, which would be really beneficial for people.

20:12And I think there is a lot of that like longer term potential that could increase sales for them. So, yeah, I'm hoping it's not bird flow. I hope that's not. I mean, it'd be terrible if we sat here and said, you know, catalyst for the stock is plague. That'd be a great thing. But, you know, no, we're not we're not doing that right now. All right. Coming up more on NVIDIA's results. First, Mark Capital founder and partner Rick Heitzman joins us to dive into the ripple effects and the major implications they could have for the market. But first, a Fast Money retail roundup, TJX at a new high. Target misses the mark.

20:41And monster reversal from Williams-Sonoma. We'll break it all down next. This is Fast Money with Melissa Lee right here on CNBC.

20:58Welcome back to Fast Money. Target and TJX both out with earnings this morning and moving in very different directions. TJX with a top and bottom line beat in raising EPS guidance for the year. Shares up as much as 7.5 % at their highs, closing up more than 3%. Target, meantime, missing on EPS, but seeing a pullback on spending and groceries and home goods. Those shares seeing their worst day since November 2022. We sort of put it out there when they announced all those price cuts on the 5 ,000 products that maybe they were doing that ahead of earnings because things were not looking so good. Courtney, what do you think?

21:32Yeah, and I think this is tough because they really came out and they said that on their discretionary items, so things like home decor or clothing, like that's really where they saw a lot of their declines. And I think the question there is you get the argument that, OK, the consumer is strapped. They're not spending money there. But then on the other side, you have like a TJ Maxx and people are spending their money. And I think the question is they're clearly strapped with inflation and they're having to decide where they're spending their money. And so these retailers are having to really position themselves of where they have the value because people are spending money.

22:01So I don't think you can blame it on the consumer. And I think some of that might have been baked in there. The consumer spending is just not at target right now. And I think that's something they really need to turn around. Yeah, I think it's just a shift in what the consumer is doing, exactly what you're talking about. I mean, you even look at some of the, you know, the like Prologis Trust and some of those warehouse companies that kind of cater to online retailers. And they're saying they had a tough quarter, right? And it's this mix shift that the retailers are having a tough time getting their hands around.

22:31So if you're somebody like a Target who people might come in there for their staples, for their groceries, that type of thing, that's what's getting really hurt right now. But then people buying the one-off special wicker basket or something like that, which I know Tim's really a big fan of. I can't get enough. It's good to have you back just to highlight what you've known for years has been an issue for me. And the scents of candles that go into the wicker basket. That's right. And the potpourri. I thought it was the chief growth officer on the Target column, you know, and Brian Cornell. They're both saying how there's no change in their outlook for the consumer since their last investor day outlook.