A version of this story first appeared in CNN Business’ “Before the Bell” newsletter. Not a subscriber? You can log in exactly here. You can listen to an audio version of the newsletter by clicking on the same link.
To say it was a good year for Nvidia would be an understatement. The California-based chipmaker has seen its shares rise about 220% this year, making it the best-performing stock in the S&P 500 in 2023.
But will next year bear the same fruit for the world’s sixth most valuable company?
What happens: Just before Thanksgiving, Nvidia dispelled doubts that its star was fading by reporting gigantic third-quarter results.
Revenue increased 34% quarter-over-quarter and 206% year-over-year. The company also raised its guidance, meaning it is expected The good times to keep going. The AI company predicted that it is Sales for the final quarter of the year would be about $20 billion – analysts had forecast about $17.8 billion.
Still, there’s a feeling on Wall Street that Nvidia’s reign can’t last forever and that cracks are beginning to appear in the company’s facade.
Worrying signs? One thing is worrying One sign for Nvidia is that the company’s own executives appear to be spending money. Company executives and top executives sold or announced plans to sell a total of 370,000 shares in November, according to the Washington Service, a data and analytics company.
All told, that’s worth about $180 million.
If all shares that were declared for sale in November are ultimately sold, Nvidia’s total insider selling would be the largest in a month since December 2021. In value terms, if fully fulfilled, November 2023 would have the highest monthly value of shares sold, according to Hannah de Wolf, business and product development manager at Washington Service, insiders have confirmed the company’s story.
During the same period, no officer or director purchased shares in the Company.
New restrictions on chip exports to China have also dampened enthusiasm for the company somewhat and could weigh on future profits.
“The export controls will have a negative impact on our China business, and we do not have a good view of the extent of this impact, even in the long term,” Nvidia CFO Colette Kress said in a press conference last month.
It is also a question of dynamics. Can a company with a market cap of $1.2 trillion continue to grow exponentially?
“We’ve all heard the advice to under-promise and over-deliver, but it can have a negative impact when people routinely expect that sort of thing,” said Steve Sosnick, chief strategist at Interactive Brokers. “It’s something we’ve gotten used to at NVDA.”
AI Gold Rush: But Nvidia is still relevant by capitalizing on the AI craze, much like they did with crypto when that was the current trend.
“It is entirely reasonable to think of NVDA as selling picks and shovels, first to the cryptocurrency gold rush, now to the AI gold rush,” Sosnick wrote in a recent note.
By Sosnick’s count, Nvidia executives mentioned AI at least 70 times in their most recent conference call. The term had already been mentioned 37 times before the first question was asked, he said.
The use of AI could extend Nvidia’s success into the new year as Wall Street continues to bet on monetizing artificial intelligence in hopes of another 1990s-style technology revolution.
“We view AI as the most transformative technology trend since the advent of the Internet in 1995 and believe many on the Street still underestimate the $1 trillion in AI spending that will be a bonanza for the chip and software industries over the next decade “We’ll be moving forward with Nvidia… leading the way,” Wedbush’s Dan Ives wrote in a recent note.
Analysts at Goldman Sachs recently gave Nvidia a 34% upside potential over the next 12 months, with a price target of $625 per share (it currently trades at around $452). Harsh Kumar, an analyst at Piper Sandler, believes that the company is still trading at a discount compared to its valuation and that the upward trend is not yet complete.
Not everyone agrees with this. “Nvidia is a great company, but it needs to grow at 30% per year to maintain its value,” DCLA managing partner Sarat Sethi said on CNBC last week. For this to happen, he said, “people will have to pay the same prices at the same margins, demand will increase and there will be no competition.”
While Sethi believes it is a good stock, he warned that investors should allocate too large a percentage of their portfolio to it. “It’s a very volatile stock,” he said.
In the past, Nvidia has suffered severe declines following missteps – between 2021 and 2022, shares of the stock fell 66%. “You have to be prepared,” Sethi said.
Bets on the value of Israeli companies surged in the days leading up to the Oct. 7 Hamas attacks, suggesting that some traders may have had advance knowledge of the impending terror attack and profited from it, a new study says , which was released on Monday.
The preliminary research, which has not been peer-reviewed, comes from law professors at Columbia University and New York University and describes a “significant” and “unusual” spike five days before the attacks in short-selling in the most popular Israel-linked fund company, reports my colleague Matt Egan. Short selling is a way to bet against the value of a security.
These bets against the value of the MSCI Israel Exchange Traded Fund (ETF) in the days before the October 7 attack “far exceeded” short selling during the Covid-19 pandemic, the 2014 Israel-Gaza war and 2008 global financial crisis, the paper notes.
“Our results suggest that traders who were aware of the impending attacks benefited from these tragic events,” the authors write.
The article, titled “Trading on Terror?”, was written by former SEC Commissioner Robert Jackson Jr., who is currently a professor at NYU and a law professor at Columbia University Professor Joshua Mitts.
The investigation found that on October 2, just five days before the Hamas attack, “nearly 100% of the over-the-counter trading volume in the MSCI Israel ETF… consisted of short selling.”
“Days before the attack, traders appeared to have anticipated the coming events,” the professors wrote.
Mitts, one of the paper’s authors, told CNN in a telephone interview that he thought it was “highly likely” that more trading had occurred behind the scenes due to the limited nature of public trading data. “We’re only seeing the tip of the iceberg,” Mitts said. “There’s a lot more out there that we can’t see but that regulators should keep an eye on.”
Mitts added that he and Jackson, his co-author, were “very confident” that the trading activity was “extraordinary” and “extraordinary” and “not the product of ordinary trading” compared to more than a decade of trading.
The authors do not currently know where the parties conducting business are located and whether the traders had ties to specific financial companies, government entities or terrorist organizations. And they urge caution before drawing such conclusions.
“It’s very speculative to link it to Hamas, and we’re not suggesting that,” Mitts said, adding there are a variety of possibilities, including the possibility that someone “overheard something” and acted accordingly .
Read more here.
A few weeks ago, Before the Bell wrote about a threat to America’s $5.1 billion whiskey industry.
The EU, the largest export market for American whiskey, will impose a 50% tariff on imports of the golden liquor on January 1.
Liquor industry advocates say it would be a devastating blow to a growing portion of the U.S. economy. The move is part of a retaliatory package of tariffs imposed by the EU on US goods in connection with a dispute over steel and aluminum.
On Tuesday, a group of bipartisan lawmakers led by Democratic Sen. Catherine Cortez Masto of Nevada sent a letter to the Biden administration urging officials to resolve the dispute with the EU by the end of the year and avoid what Insider say “dramatic” damage to the industry.
“The American liquor industry supports over 19,000 jobs in Nevada and pumps billions into our economy each year,” said Senator Cortez Masto. “I call on the administration to act now to eliminate these devastating tariffs on American exports and stand up for American workers.”
The letter, shared exclusively with CNN, was signed by 12 U.S. senators, including Republican Todd Young of Indiana, Democrats Tim Kaine and Mark Warner of Virginia, Republican Rand Paul of Kentucky, Minority Leader Mitch McConnell, Republicans Bill Hagerty of Tennessee and Democrat Marsha Blackburn of West Virginia Joe Manchin, Republican of Kansas Roger Marshall and Republican of Alaska Katie Britt.
“Spirits have had a significant cultural impact in our country and are currently having a profound impact on the U.S. economy. In 2022 alone, U.S. spirits exports reached $2.06 billion. But the impact of the retaliatory tariffs has been devastating…We believe that imposing additional tariffs on this industry is harmful,” the senators wrote.
“It is mutually beneficial to find a way forward and we believe spirits and wines are a point where agreement can be reached to limit the damage to all parties.”