Nvidia “Guidance for the Ages” The BlueBird Lookout Q22023

Embracing Time in Investing: Long-Term Vision and Leadership: Nvidia

“The stock market is a device for transferring money from the impatient to the patient.”
Warren Buffet

The second quarter, highlighted by Nvidia’s “guidance for the ages,” served as a striking testament to the prescient wisdom of Warren Buffet. Despite looming recession fears, uncertainty surrounding debt limit negotiations, and the repercussions of the March banking crisis, the markets experienced a resounding resurgence in June.

Time is essential for individual investors, as companies rhythmically disclose their quarterly results, showcasing notable year-to-year improvements. Notably, the remarkable leadership displayed by these enterprises, characterized by their far-sighted investment strategies spanning multiple years, left an indelible impression this past quarter.

Nvidia’s second-quarter results underscore time’s profound influence and the imperative for investors to align with visionary entities. By embracing the cadence of quarterly cycles and steadfastly nurturing a long-term vision, investors position themselves for enduring success.

This year’s market has been a theater dominated by the giants of technology, propelled forward by the explosive growth of Artificial Intelligence (AI). Within this landscape, one shining example stands out—the late May earnings results of Nvidia, a chip company often heralded as the pick and shovel maker for this modern-day gold rush.

Nvidia’s Time-Tested Triumph: AI, Vision, and Market Impact

The true magnitude of Nvidia’s prowess became crystal clear as they unveiled their blowout earnings, captivating the attention of analysts and investors alike. Their chips, vital components driving the Chat GBT revolution, played an instrumental role in this resounding earnings results.

In a stunning turn of events, Nvidia defied expectations by raising their revenue guidance for the upcoming quarter from $7 billion to $11 billion—a jaw-dropping 50% surprise increase. (Editor Note: In late August 2023, Nvidia reported $13 billion in revenues and guided for $16 billion for the next quarter)

This audacious move reverberated throughout the global market, especially the tech sector, leaving an indelible mark on the industry and beyond. Long-time chip analyst Dan Ives called it “guidance for the ages.”

Generative AI’s Global Impact: Transforming GDP and Productivity

It is worth noting that Nvidia’s journey toward this achievement began nine long years ago. Today, each A.I.-focused chip sells for over $36,000, a 40% increase from a few months ago. Ten thousand of these chips trained the popular Open AI ChatGBT application! Productivity increases are essential in raising our standard of living, and this latest innovation may go a long way in kickstarting our productivity growth, which has been stagnant for decades.

The McKinsey consulting firm estimates that “regaining historical rates of productivity growth would add $10 trillion to US GDP (currently $23 trillion) – a boost needed to confront workforce shortages, debt, inflation, and the energy transition.” A recent report by Goldman Sachs says that Generative AI may raise Global GDP by 7%, a remarkable figure for a single technology.[2]

Jensen Huang, who co-founded Nvidia in 1993 in Denny’s restaurant, had this to say in the earnings release?

“The computer industry is going through two simultaneous transitions — accelerated computing and generative A.I.

A trillion dollars of installed global data center infrastructure will transition from general-purpose to accelerated computing as companies race to apply generative A.I. into every product, service, and business process.“

In this captivating narrative, a grand transformation—one where the convergence of technology, innovation, and vision sparks a profound ripple effect, propels us into a future that was once only confined to the realm of dreams.
May 24 2023 Nvidia’s Q1 Fiscal 2024 Earnings Release

The bullish capital markets show promising signs of expansion into new sectors in late June and early July. With increased tech investment, moderating inflation, and the prospect of the end of interest rate hikes, smaller, cyclical, and value-oriented companies, and the sluggish bond market may start to have a more meaningful impact on your investments.

Reshoring: A Major Driver of Investment in American Factories

Another important and new trend contributing to the economy’s resilience is the reshoring of supply chains back to North America. The recently passed Inflation Reduction Act and the CHIPS Act, designed to encourage massive investments, appear to work, as seen in the following graph of new investments into American factories.

New sourcing strategies created 364,000 new manufacturing jobs in the U. S.[1] Rising shipping costs, demand for supply chain transparency, and concerns over supply chain security are key drivers behind this reshoring movement. Could this be a reason for the strong labor market?

Reshoring entails substantial investments in American factories, equipment, and technology to enhance efficiency and productivity. The chemicals industry committed $100 billion to new investments in 2022, while the semiconductor industry matched this pledge.

These investments stimulate economic growth and job creation and strengthen the supply chain.

General Electric, Walmart, and Intel are just a few of the companies that have announced major North American investment plans that exemplify reshoring with billion-dollar investments in domestic production.

Reshoring manufacturing jobs reasserts the United States as a global manufacturing leader. Companies gain greater control, responsiveness, and resilience by bringing production closer to home.

The continued reshoring of manufacturing jobs will shape the future of American industries, driving technological advancement, enhancing supply chain resilience, and securing the nation’s economic future.

Market Insights and Trends: Crosscurrents and Economic Landscap

TL;DR

Crosscurrents continue to dominate the economy.
Our leaders in Washington resolved the Debt Limit crisis for the foreseeable future.
Housing and employment remain strong despite the high-interest rates.
Despite a slowdown in many manufacturing indicators, the service sector is holding firm and is more than 5X bigger than the manufacturing sector.
The banking crisis resulted in some back-channel liquidity flowing into the economy, helping to bolster the public markets.
In addition, companies continue their strong stock buyback programs, which reduce outstanding shares and bolster the value of the remaining outstanding shares.