Nvidia’s Big Quarter… And Target’s Holiday Sales Warning 11/20/24

0:00Live from the NASDAQ market site in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap tonight. NVIDIA in focus. Shares of the semi-giant just about 1 % lower right now after its latest report bouncing around after hours. The conference call just getting underway. We are dialed in to bring you all the details and all the trades. And way off target, shares of the discount retailer crushed after posting its biggest earnings miss in two years. Why the company is struggling against Walmart and the rest of its competitors. And what is the strategy to turn things around?

0:28Plus, sell it all. That is a chart master's call for this high-flying crypto play. The tale of the technicals on micro strategy coming up. I'm Melissa Lee. Coming to you live from Studio B at the NASDAQ. On the desk tonight, Karen Feinerman, Dan Nathan, Guy Adami, and Rebecca Patterson, former chief strategist at Bridgewater. We start off with NVIDIA's big Q3 earnings report. The AI darling's latest quarter crushing Wall Street estimates. Revenue nearly doubling from a year ago as its AI chip business accelerates shares, which had tripled this year heading into the report well off their after-hours lows.

1:00CNBC's Christina Parts Nevelis is back here with us on set and has got the numbers. Christina. You just talked about it. Ninety-four percent increase in revenues, a hundred and twelve percent increase in data centers just year over year, gross margin, 75 percent. They beat across all fronts, including their categories from gaming, I mentioned data centers, and yet the stock initially fell two percent, then down one percent. The problem is there's been so much of an emphasis on guidance. The guidance came in at 37.5 billion, slightly higher than what the consensus was, but lower than the whisper number, you know, the number that's provided to clients.

1:31And that was the same thing that happened last quarter. We saw the stock sell off 6 percent the day after. The focus, though, is really on Blackwell shipments. That's the latest iteration of the GPU. And the CFO, Colette Krass, she had some comments on the website, and she said, quote, both Hopper and Blackwell systems have certain supply constraints, and the demand for Blackwell is expected to exceed supply for several quarters in fiscal 2026. So what is that doing? That is letting us know that maybe supply is going to be an issue for several quarters. We were expecting the ramp to happen in this upcoming April quarter, and maybe it's going to be pushed out even longer, farther.

2:07So that's part of the reason why you saw more of the stock drop. Really, that's going to be the focus on the call is Blackwell chips, the latest iteration. Are there going to be delays, overheating, which a lot of people have already debunked at this point? But is that going to be what's going to hamper the company going forward? The constraints on Hopper, was that expected? Because there was some thought in the analyst community that if Blackwell was constrained, that Hopper would be able to sort of pick up that demand and sort of offset the negative revenue push. Yeah, so that's a very good point, the fact that she's adding Hopper into that sentence, saying Hopper and Blackwell have supply constraints, where previously on last earnings call, they said that there were no issues.

2:42So perhaps that's a good sign that the demand has shifted straight to Hopper right now, but so much so that they're unable to keep up with it. So excellent point that they put that in the same sentence. So do we know supply constraints are due to the supply not being there or the demand overwhelming the supply? So the excellent point, because we know in the last quarter in the summer, it was, you know, they had to revamp the production and change the yield at TSMC. And so that created a little bit of a delay. But according to the company, when I caught up with them and chatted, it's not a delay.

3:13It's just normal process because the latest chip is so complex that you have to change things around and the yield is not going to be the same right away. We don't know yet now, this time around this quarter, if that's the same case, if it's actually issues at TSMC. I'm sure they're going to address it. I'm sure they're going to say, no, that's not the case because they're quick to react to those reports. First of all, it's great to have Christina back. Of course, yes. She's been back for the first time back with us, number one. Number two, so the magnets, this is what I look at. The magnitudes of the beats are getting, listen, the numbers are huge, but in terms of percentage, smaller and smaller.

3:48And this was a$50 stock this time last year. I mean, revenues and EPS growth 80 % year over year, but the stock has tripled. So any thoughts on that? Excellent. Well, that just means everybody's getting a lot smarter, right? And realizing a year ago, I think it was a 20 % magnitude difference, and now it's, what, 5 % or 6%. And hats off again, I said this earlier, to retail traders because 48 percent of the daily flow is retail traders for the last five years, which means that they understand the fundamentals of this company and they have stuck with it. I think we need to eventually come down.

4:21You can't keep climbing at that same magnitude, which is what we're getting with Colette with these comments. Right. She's letting us know, you know, setting the tone that, you know, we can't keep going at that magnitude. We're doing well. Demand is insane, as Jensen Wong has said in this report, too. He said the age of AI is full steam. So there's all these wonderful flowery words to describe demand for these chips. But I think at one point, there's not necessarily going to be a plateau, but we can't keep going at that increment, to your point. At the same time, though, Dan, if I told you what the quarter was going to be and what the guidance would be, and I said, guess what the stock reaction would be?

4:53Would you guess down half a percent? I would have thought down five percent or so. I mean, I think to, you know, Christine, her point is that, you know, estimates or expectations were high. that, you know, that whisper number that is among the buy side. Right. So they put it out there. They get a sense for what consensus is and they think this is the number that they have to kind of get above. Again, you know, it just shows you that investors want to be exposed here. There's very few ways in which to do that. We'll talk a little bit about their major customers in a second. But do you take anything away?

5:23You just said that demand obviously is there. They keep talking about capacity constraint. But at some point, isn't there going to be a quarter where their biggest customers actually guide capex down a little bit. And that's like, that would be my fear if I'm lying to stock. Yeah. But then that's like, I guess a year and a half or more out, given what we saw from all of the hyperscalers right now and the massive increases in all their spending, that spending is going to be reflected for several quarters for NVIDIA positive. But no doubt this can't keep continuing. And then you can argue, like, look at AWS creating their own chips.

5:53They're going to, you know, compete with them directly. And that's going to be an issue with NVIDIA, but then NVIDIA will say, well, we have CUDA, we have software, we have networking, right? Networking is a big portion. Gaming is 10 % of revenues. So it's not only just about these particular GPUs, which go into racks. So it's a lot more complicated. They're providing the whole, you know, kit and caboodle as opposed to just end to end. Yeah. Christina, good to see you. Welcome back. I appreciate that. On the conference call. Yeah. Christina Parts Nevelis. We were talking in the green room before the show about how important this one stock is to a constellation of trades that make the stock market go higher or lower.

6:31You know, it's hard to think back over literally centuries and find a single company that had so much sway over the global economy or the global financial markets. I don't think there is one that hasn't had any backing per se from a government, even like British East Indies. In 1990? Not as big as this, relatively speaking. So it is incredibly important, not just for the people trading the tick by tick right after the earnings and the call, but also when you take back a step and think about the macro picture. And honestly, this is the heart of U.S. exceptionalism. When we talk about why the U.S.

7:08outperforms for decades or more, this is it. It's tech dominance. It's the weight of tech in our equity market. It's the fact that we have companies, the Mag7 over the next 12 months, will invest half a trillion dollars in CapEx and R &D. So put that in context, Chips and Science Act was 52 billion. So this is many multiples of that. So it's just the scale of our dominance and NVIDIA is the cornerstone of it. So whether they disappointed or not, to me, it's the fact that you have this structural advantage. Right. Let me make one point about that. I think that's really interesting. That's the estimate for a half a trillion dollars in CapEx and R &D over the next, what did you say?

7:46Next year. Next year. Okay. So if it comes in at 450, just think about that, what happens to these stocks. Like, they're going to go down a lot. You know what I mean? It wouldn't incrementally take, because estimates are going up. And the one thing I'll just say, if you go back to Microsoft, they're 19 % customer of NVIDIA, right? And we talk about CapEx, how much it went up. It didn't go up that much, right, after they reported. And so we're not seeing the sort of step functions that we saw, let's say, three quarters ago and that sort of thing. They also talked about being capacity constrained, one of the reasons why they didn't have higher revenues.

8:16Now, their cloud business is growing 31 percent year over year, which is fantastic. They're taking market share from AWS. I just kind of feel like we're going to go from capacity constrained to capacity over built, that sort of thing, and they're not so distant future. And so when you're coming in and you're beating these numbers just by a hair and the stocks are still sticking around, it shows you that investors still want the exposure. But sooner or later, I think it's going to be like one of those things where you're going to start seeing a couple quarters of declines by not just the picks and shovels, but also the hyperscalers.

8:44I think that's a ways off, though. And I think that the hard part of owning NVIDIA is if everybody knows, all right, six quarters from now, they're going to have slower growth. When do you exit? You want to exit before all the other people decide to exit. So I don't know. There's the rub. All right. For more on NVIDIA's report, let's bring in Cisco Hatties, Chris Roland. Chris, great to see you. Hi, Melissa. What do you make of the comments about being a supply constraint, not just in Blackwell, but also in Hopper? Yeah, I think that the Vegas line here was probably 38, 39. They missed slightly, but that supply constraint comment, that probably means they probably could have done 40 or maybe even more.

9:29We don't know what the supply constraint is of late, whether it's memory or still co-oss. My guess is memory as they move from H100 to H200. But I think clearly NVIDIA could have shipped more here had they had all the components. In terms of how we're supposed to dissect that supply constraint comment, part of it is understanding what was going on with Blackwell and whether or not there was a shift to Hopper in the light of a supply constraint situation for the Blackwell chip. Have we gotten anything, any commentary about the overheating issue? Is that part of it? I don't think that that's part of it at this point.

10:13They talked about a successful new mask set helping yields for that product. So I'm not sure it's that chip. I think it could be an additional component like memory. It also could be these racks that are incredibly complex. We don't know about transceiver availability. We don't know about all the other thousands of components that are going into these racks. If any one is constrained, it could constrain shipments overall. Chris, I'm going to tweak a little math here just to make it easy. So they're going to do about$190 billion of revenue next year. That's sitting on top of a company that's basically trading$3.6 trillion market cap.

10:57You know, their earnings are great, but they seemingly they're out earning their revenue. My point is, like, when does that catch up? Because either they're going to grow into that price to sales, which I'm hard pressed to believe they can, or something's got to get probably on the margin front of the earnings front. Thoughts on that? Yeah, I think, first of all, we'll be we'll shake out north of 200 for next year. Secondly, you have to look at gross margin for this company in the mid-70s. It's truly incredible. When you look at, let's say, EV to Rev, it really doesn't get more profitable than NVIDIA.

11:38Taking a look at some of the line item beats, and obviously all eyes is on data center, Chris, but automotive was one of the biggest beats. And I'm wondering, just in terms of, you know, trying to extrapolate that trade, was that Tesla, basically? That was definitely, well, I think auto is really more about the vehicle itself, as opposed to Tesla's data center. And Tesla does their own AI. I think this is somebody else. Maybe it's an early ramp with Mercedes, for example. But Colette did talk about self-driving as the huge motivator there, as opposed to infotainment or consoles. So they are moving to the AI portion of their auto story.

12:27Chris, thanks for being on. Another question about the – sorry, I just lost my train of thought for a second. The competition, who do you think is, how far actually in front do you think, away are we from real competition? How long are you going to have this market to themselves? Well, Amazon sounds like they're ramping supply. AMD had a hot start. They're still going to have growth year over year. But that seems to, at least that really high-end$12 billion kind of number for next year seems to have faded. So it's a mixed picture out there. I would say that this pie is growing very quickly for all and that I think NVIDIA can still grow even with guys like Amazon, guys like Microsoft doing more themselves.

13:21They can still grow meaningfully even into this diversification. Chris, great to get your take on the quarter. Appreciate your time. Thanks, guys. Chris Roland, and Nvidia shares now down about eight-tenths of one percent. Not too bad of a reaction considering the ramp going into the quarter. I mean, as Dan had said, you would have expected down, I don't know, a few percentage at least. Well, I think Dan could speak to this, but I think the market vis-a-vis the expected move was expecting a$300 billion move one way or another. Now, obviously, that's not taking place now. But just for some perspective, I think there are only 35 companies in the world that are that big in the first place.

13:59Bank of America, for example, is like a$310 billion company. So the fact that the market was expecting a move of that magnitude and not getting it, a lot of people were sucking wind on some options. So we'll see how that plays out as well. What do you think? I've got to wait for the call. I feel like there's so much nuance there that we will start to get that. I would doubt we end up here flat-ish at the end of the call. Mel, your question about Tesla is a really interesting one. Do you guys remember like two or three quarters ago, Tesla diverted, let's say, a half a billion dollar worth of NVIDIA GPUs over to XAI, which kind of makes a lot of sense if you think about what they've been building.

14:33You saw XAI was just valued at, you know,$50 billion. I think that's today. But think about now why Tesla has rallied so much over the last couple of weeks or so. It is for the idea that you're going to have regulation pulled back for full self-driving and then autonomy. They're going to rely dramatically on building out data centers, you know, to train those cars. So that's probably something that could definitely be a bit of a tailwind for NVIDIA, especially as you see maybe some of these hyperscalers, I think, pull back as we get into next year. Well, think about the full self-driving federal framework, which could be a boost.

15:04And then the crypto trade. Remember, we used to be a crypto play. That could be a boost. And then you have the AI stuff going on, too. So, you know, a lot of different areas NVIDIA can really capitalize on. It's not like there are there are many examples, though, productivity gains. Right. We keep talking about is the promise of it there. And I think we're early in seeing those productivity gains. So if those accelerate more, I think that would help as well. All right. Meantime, the dollar strengthening over the last several weeks, especially against the Japanese yen. Rebecca, this is something that you flagged to us.

15:38So you're watching the potential parity against the euro. We've been hearing more and more about that, too. Yeah. Yeah, so the euro is down about 4 % against the dollar since the election, or yeah, just around the election, which is a pretty big move in such a short period of time. And when I think about where it goes from here, you know, the market has removed some Fed cuts for the U.S. The Fed is looking for more rate cuts from the European central banks. That rate differential, you could argue that's priced in. But if we get some of the policies from President-elect Trump, whether we're talking about the tax cuts, deporting immigrants, tariffs, all of those things are inflationary.

16:16So that could remove even more Fed cuts from expectations. So right now we have three between now and the end of next year. We could go to one or zero, depending on whether or not those policies lead to greater inflation and inflation expectations. So that's a biggie. Europe is just a hard time getting out of first gear. Germany is going to have two years in a row of negative growth. So there's not a lot to pull capital into Europe right now. And then, of course, they're a lot closer, sadly, to the Ukraine-Russia situation. I'd say the one positive catalyst on my radar screen for the euro will be in Q1 next year.

16:49And that is we're going to have an election in Germany. And the potential new chancellor, Mertz, is talking about a little less fiscal austerity, actually spending money in Germany, which would be a big deal. and that could be a catalyst given valuations. Stimulus. Actual, well... They don't call it that. No, no, no. They call it less austerity. Be more German. But if we don't get that, I don't see a lot of bright lights anytime soon. So I do think parity is not a crazy thing to happen in the next few months. Okay, how about... I hope it's not an outlier, but if the Ukraine situation is resolved, I would think that would be a positive for Europe.

17:28I would hope so. I would hope so. I think a lot is going to come around what does that piece or resolution look like? Are sanctions lifted? Is Germany allowed to start buying cheap Russian gas again? Or does it do a deal to avoid tariffs and it's buying more U.S. gas? I think there's a lot of questions around what that landscape looks like that tells me where we're going from here for Europe. There's going to be a lot of money that needs to be invested in Ukrainian reconstruction, too, which is good for Europe growth. But it's a big expense and they don't have the money. Dan Channels is godfather to all do.

18:01I noticed something interesting. I see what you did there. Yes, Michael down in Cuba. Yen has been weakening at a pretty significant rate. While 10-year yield, like Japanese bond yields, I'm going higher. There's something amiss there. And I think markets are focused on it here, clearly. I think they're focused on it over there. Thoughts on that? Oh, absolutely. I mean, in Japan, the large corporations really want currency stability so they can plan their expenses, their investments. So when we get the gyrations that we've had this year in currency markets, it really slows down longer term spending for Japanese companies.

18:33And that does eventually feed through into their earnings. So they want to avoid that. So I wouldn't be surprised if we see more intervention, verbal or actual intervention from Japan again in the coming months, just given the speed of this move. And obviously, Japan is very exposed to the United States. And if we do have a trade war, they're going to get caught in that crossfire. Coming up, MicroStrategy shares hitting record highs today, but the chartmaster isn't loving the technicals. Why, he is hitting the sell button on this one ahead. But first, major moves in media. CNBC parent company Comcast set to spin off its cable businesses.

19:07The details and whether it could spark any more M &A action don't go anywhere. Fast Money is back in two. Welcome back to Fast Money. Comcast shares up almost 2 % today after the media giant announced plans to spin off its cable networks, which includes CNBC. Julie Borson has got all the details. And of course, this is a big story out there and also internally. That's right, Melissa. Well, one source telling me that Comcast spinning off its cable networks isn't the end, but rather the beginning as the new company called Spinco for now looks for new deals and new revenue streams. The spinoff includes CNBC, which is what we're on right now on MSNBC, along with channels with sports rights, USA and the Golf Channel, and entertainment assets, USA, E, Sci-Fi, and Oxygen.

19:53Now, sources tell me that Spinco will want to buy other cable networks, potentially looking at Warner Brothers, Discoveries, TBS, TNT, HETV, or the Food Network. Other potential targets, AMC Networks, and Starz, which is about to complete its own spin from Lionsgate. Now, consolidating cable networks would help Spinco have more scale to better negotiate higher retransmission fees. But this new company could also license its networks beyond Peacock to all the other streaming platforms like Hulu or Max. And sources tell me that this new company will look for new revenue streams such as paid events.

20:28Now, meanwhile, Comcast is expected to look for more opportunities to grow Peacock, which will benefit from having NBA rights starting next year. Now, this deal is set to close in about a year. And in the meantime, we'll see what commercial arrangements that these two companies decide to strike. Melissa? Julia, you know, for a long time, we've always thought about, you know, Peacock is part of the family. Our content appears on Peacock, et cetera, et cetera. So under this new arrangement, where does Peacock get its content? Because for so long, it's drawn on its cable networks as a source of content.

20:59And could that actually prevent this new spin code from licensing its content to these other cable companies like a Paramount or Warner Brothers Discovery? Well, look, we have to remember that all of these media companies are frenemies. They all compete with each other and also license content to each other. NBC Universal has a TV studio that sells content to other networks. But when it comes to Peacock, we have to remember that Comcast NBC Universal is retaining NBC as well as Bravo. NBC has NBC Sports, which includes the NFL and now NBA rights starting next year. And then you also have all that reality TV content from Bravo.

21:36So traditional, regular NBC, including NBC News, is going to remain part of this original company. The companies that spin off from that, including CNBC, may license back content to be on Peacock, but they might also now have more flexibility to license elsewhere as well. Do you get the sense that this was really put into motion in a very sort of more directed way after the election, seeing that there might be fewer regulatory barriers to combining these cable companies? Well, look, there are no regulatory issues to the split. There is no regulatory challenge there. And I think that's why they floated this well before the election.

22:15I also think that in splitting off these cable networks, the new company, the Spinco, is small enough that they could do acquisitions that probably wouldn't have been really problematic in the prior administration, though it is true that the Trump administration is expected to be a lot more flexible with M &A and bigger deals. So I think this is something they've actually probably been working on or thinking about for quite a while. But it is pretty remarkable that they first floated the trial balloon less than three weeks ago and then just announced it today. And of course, in the interim is the election.

22:46So it makes sense to think that might, that might have accelerated things a bit. Playing the role of skeptic, Julia, does it, I mean, are we just staving off the inevitable in terms of cable companies combining in order to gain some leverage over retransmission fees? I mean, the way of the world is going away from cable. That is the ultimate problem. It's true that, I mean, and in fact, that's why they're spinning off these cable networks. So what's remaining in the studio and the theme parks is not going to be weighed down by the challenges of the linear TV ecosystem. That's what's happening.

23:17Cord cutting is hurting the linear TV ecosystem. But the fact that Brian Roberts is going to remain a controlling shareholder of this new co as he is of Comcast, the fact that he's going to control a third of all the shares indicates that he has some confidence in this. They also could have spun off these assets and immediately sold them to private equity. That is one scenario that could have happened. But instead, they said, we're going to spin them off and we're going to operate it as a separate publicly traded company. Down the line, could they decide that this is a losing game and they want to sell it off?