Finance
Nvidia’s business is growing faster than expected. Investors were still disappointed.
Sometimes your best just isn’t good enough. That’s the lesson Nvidia (NVDA) learned Wednesday after the company’s stock price fell 3% despite posting better-than-expected second quarter earnings and guidance for the third quarter.
It’s not as though the company’s growth was unimpressive, either. Revenue jumped 122% year over year to $30 billion, up from $13.5 billion. Nvidia’s all-important data center revenue topped out at $26.3 billion, a 154% year-over-year increase.
But that wasn’t the kind of blowout that investors have quickly grown accustomed to over the last few quarters.
Beyond investor sentiment, Wall Street analysts have also seemingly caught on to Nvidia’s growth after several quarters of big surprises to the upside.
Nvidia’s revenue reported Wednesday beat Wall Street expectations by 4.1%, the slimmest margin since the fourth quarter of its 2023 fiscal year.
As Nvidia’s business has boomed over the last two years, the company’s revenue topped Wall Street forecasts by double-digit percentage points for three straight quarters, including a 22% difference in its fiscal second quarter of 2024.
And as Wall Street appears to have gotten a better feel for Nvidia’s growth at this point in the AI investment cycle, questions have also arisen about the status of Nvidia’s next-generation Blackwell chip.
Ahead of the company’s earnings announcement, the Information reported that the chip, the follow-up to Nvidia’s Hopper line, faced delays that could impact some of the company’s biggest customers including Microsoft and Google.
In her quarterly comments, Nvidia CFO Colette Kress explained that the company made changes to Blackwell to improve its production yield. CEO Jensen Huang, meanwhile, said that the chip is currently being sampled to customers, a major step toward shipping the processor at volume.
Huang said the company expects to ship several billion dollars of Blackwell revenue in the fourth quarter. But the CEO couldn’t pin down exactly how much revenue Blackwell would generate, despite analysts’ questions.
Huang, however, did provide a number of other strong points for Nvidia, including pointing out that demand for Blackwell platforms is well above supply. The CEO also said that Nvidia’s Hopper platform will continue to grow in the second half of the year, and explained that the company expects its data center business to grow “quite significantly next year.”
Huang also said that AI inferencing is driving the company’s data center revenue. Inferencing refers to computers running AI programs and providing users with answers to their queries.
That should put to rest fears of threats to Nvidia’s long-term growth as companies pivot from training AI models to using inference. Huang appears to believe that Nvidia will continue to plow forward as customers use its chips to both train and run their AI models.
Nvidia is still the world leader in AI chips, and it’ll be some time before rivals AMD (AMD) and Intel (INTC) catch up to its hardware and software lead. And while Nvidia may be facing a near-term decline in its stock price, Wall Street is still on board.
In an investor note released following Nvidia’s earnings, BofA’s Vivek Arya raised his price target on the chip designer to $165 from $150 per share, writing, “Despite the quarterly noise, we continue to believe in [Nvidia’s] unique growth opportunity, execution and dominant 80%+ share as generative AI deployments are still in their first 1-1.5 [years] of what is at least a 3 to 4-year upfront investment cycle.”
Raymond James’s Srini Pajjuri also raised the firm’s price target on Nvidia’s stock from $120 to $140, writing in an investor note that “Blackwell delays appear better than feared and management is forecasting a strong ramp in FQ4.”
Pajjuri also said demand for Nvidia’s current-generation Hopper chip continues to be healthy and pointed to anticipated sales growth in Q4, despite Blackwell production ramping up at the same time.
Morgan Stanley’s Joseph Moore, who raised his price target for Nvidia from $144 to $150, called out Nvidia’s sky-high expectations with regards to the company’s stock moves after the earnings report.
“Expectations become more challenging as the superlative becomes mundane, but this was still a very strong quarter given the transitional nature of the current environment.”
Whether that’s enough to satisfy investors next quarter remains to be seen.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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Finance
Aussie lawyer warns of ‘middle class’ family battles after budget introduces ‘backdoor death tax’
Australians are expected to pass on trillions of dollars in assets in the coming years as the grey tsunami of wealthy baby boomers crashes across the economy. But some of those expecting the windfall could be more likely to find themselves in a potential dispute with their loved ones as tax changes introduced to trusts commonly used in estate planning increase the likelihood of conflict.
Lawyers who deal with contested wills and estates foresee issues of conflict more likely to arise if the proposed changes go ahead. Alun Hill is the national director of the contested estates division of Armstrong Legal and believes there will be more reasons for discontent and for wills to be challenged due to the increased tax take being slipped in.
“It widens the battleground,” he told Yahoo Finance. “It just creates more reason why there might be someone who wants to contest a will.”
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Under the changes in Labor’s controversial budget, the unprecedented 30 per cent minimum level of capital gains tax will apply to the most common form of estate planning trust, known as a the testamentary discretionary trust.
While the government says its legislation pertaining to tax changes for trusts will be brought before parliament later this year, the slated changes would come into effect from July 1, 2028, and only specifically exclude fixed testamentary trusts. Fixed trusts are different from discretionary trusts as trustees don’t have the discretion to change the proportion of income a beneficiary is entitled to.
“Discretionary trusts aren’t just used as a tax minimisation vehicle,” Hill said. “Traditionally they’ve been used to provide the trustee with the ability to do what’s necessary to carry out the intentions of the testator (the person who wrote the will).”
While the finer details remain to be seen, the new tax floor regardless of the income of beneficiaries and the overall higher CGT on assets, will mean beneficiaries will see less passed on than previously expected – and that can be grounds for a challenge.
“What this really does is create the potential for claims being made against the estate by the spouse or by whoever the intended beneficiary is, who is no longer receiving adequate provision or appropriate provision under the testamentary trust,” Hill said.
A charity has announced its new chair following the retirement of its founder.
Peter Neville worked for more than five years to set up Guernsey Community Savings, which first opened its doors in September 2020 to support people who were not able to access mainstream banking, staff said.
Former banker James Ellis is taking over the role. Neville said: “James brings exactly the right blend of financial services experience, charitable involvement and community understanding.”
The charity had helped about 200 people, who would otherwise have been excluded from the financial system access, to accounts and linked debit cards, and offered money‑management guidance to many more, staff said.
Neville said: “The initiatives now being discussed, together with the additional features offered by the new money‑transmission platform, reassure me that James’s vision aligns perfectly with the aims we set in those early days.
“I wish the board and GCS staff every success as they take the charity forward.”
Ellis said: “‘The creation of Guernsey Community Savings in 2020 was only possible because of Peter’s unique set of qualities that enabled him to create a talented team and the structure to tackle the issues facing the financially excluded in our island.
“I was delighted when he asked me to continue with his work and further expand his vision, which I share, to provide help in the form of bank accounts, debit cards and financial education and to realise our ambition to provide grants and soft loans where needed.”
He added he was pleased Neville agreed to remain involved with the charity as life president.
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Hong Kong’s first five-year plan will map out concrete paths to address the city’s shortcomings and magnify socio-economic benefits, including how artificial intelligence can create quality jobs, the financial chief has said a day ahead of the public consultation on the blueprint.
Financial Secretary Paul Chan Mo-po said on Sunday that the key task for the blueprint would be the upgrading and transformation of the city’s economy, vowing to press ahead with the Northern Metropolis megaproject and make it a “spatial carrier for deploying emerging and future industries”.
“Hong Kong’s five-year plan aims not only to provide greater momentum for economic development and better application of technology, but also to promote more inclusive and equitable development in society, provide residents with more quality employment opportunities, and create a better life,” he said in his weekly blog.
The efforts to formulate Hong Kong’s first five-year plan are led by Chief Executive John Lee Ka-chiu, and the blueprint is expected to be finalised by the end of 2026.
Lee said last week that the public consultation for the outline would begin on Monday, confirming an earlier South China Morning Post report.
The public can submit views via dedicated websites during the two-month period, and the government would hold multiple sessions to gather input from various sectors, including lawmakers and industry representatives.
The blueprint aims at aligning Hong Kong’s development with China’s 15th five-year plan, which positions the city as an international hub for finance, shipping, trading, innovation and technology, offshore yuan and global talent.
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