Nvidia's Killer Earnings ??
In this issue of the Peel:
Market Snapshot ??
Banana Bits ??
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Macro Monkey Says ??
Wait A Minute
The group chat’s been leaked.
Calm down—I don’t mean you and your friends. The Federal Reserve, America’s Central Bank, has leaked the deets on their most personal thoughts, wishes, and dreams about a thing we all hold so dearly—the U.S. economy.
The Fed Minutes, a document released weeks following each FOMC meeting detailing their insights on monetary policy, just dropped.
Reading is boring, so we went ahead and poured through the entire document so you don’t have to. Now, let’s see what’s going on.
Learning A New Language
Federal Reserve officials took George Orwell’s idea of “doublespeak” and ran with it, creating their own language called “Fedspeak.” In case you’re unfamiliar, we got a free and in-depth lesson in the language this month.
Rates and the balance sheet were hot topics of conversation. So, as a reminder, this is where we currently stand:
The above chart depicts the fastest monetary policy tightening cycle of all time. We don’t need to dive into ancient history all the way back in 2022 and 2023, but everyone who can spell “Wall Street” is now just wondering when that chart will reverse.
According to the minutes, rates won’t begin to head lower until FOMC members have “greater confidence” that inflation was systematically “retreating.”?
“Greater confidence” is a perfect example of this scarcely spoken language of Fedspeak. I’d love to translate, but I don’t even think JPow really knows what he means.
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Now, the other key aspect of monetary policy is, of course, the Federal Reserve’s balance sheet.
The Fed uses the balance sheet to regulate long-term interest rates and manage liquidity, for the most part. When the “size,” or amount of assets, on the balance sheet increases, liquidity rises, and longer-term rates move lower.
As the above chart tells us, the FOMC has been reducing the balance sheet by $95bn/month since early 2022. A brief uptick in the wake of the SVB crises occurred, but for the most part, the Fed’s been shedding assets like my dog’s hair this winter.
What’s New?
Now that we’re all on the same page, two questions plague Fed Watchers more than any others, including:
Neither one of those questions was answered in these Fed minutes, but using Fedspeak, they did pretend like they were shedding some light on this subject.
Notably, FOMC participants agreed that “recent indicators suggested that economic activity had been expanding at a solid pace.” While ideal, this does not bode well for those waiting on a rate cut for their portfolio to get back in the green.
Still, the greatest challenge is assessing the degree to which the “risks of moving too quickly” are present. Like we always say, JPow considers himself a modern-day Paul Volcker and is, as such, terrified of easing conditions too quickly.
We’ll keep using this chart until we’re as blue in the face as the lines on it are.
So, we didn’t really learn a whole lot of new info from these minutes. That’s no surprise—generally, JPow likes to spit game on the juicy details during the post-game, I mean, post-FOMC press conference.
The Takeaway?
Even when the Fed says nothing, they’re saying something.
By not making any changes, we can assume the FOMC still has just as little of any idea of what’s going on as they did last meeting.
That means, if anything, there’s basically no chance of a rate cut in March. We could see a slowdown in the balance sheet runoff, and we’d be surprised if the Fed cuts rates before loosening the runoff.
All eyes are now on the May and, more so, the June meeting for rate cuts to enter the conversation at the adult table.
But the March meeting will also give us an update on the Fed’s Summary Economic Projections, a key indicator in assessing how the Fed feels about markets, financial conditions, and the macroeconomy going forward.
March is also the month many say comes “in like a lion, out like a lamb.” We sure hope that holds true when it comes to the monetary policy picture.
What's Ripe ??
Garmin (GRMN) ??8.8%
领英推荐
CRISPR Therapeutics (CRSP) ??4.7%
What's Rotten ??
Palo Alto Networks (PANW) ??28.4%
Teladoc (TDOC) ??23.7%
Thought Banana ??
Earnings Spotlight: The King (NVDA)
One word—Wow.
The bar was set higher than Snoop Dogg and Wiz Khalifa at Rolling Loud, but Nvidia showed with an army of Seth Rogens and managed to beat every expectation.
The Numbers
Yesterday afternoon, Nvidia reported their quarterly results for Q4 and the full year 2024 —because they’re always a year ahead.
Immediately, the results blew Wall Street away to such a degree we thought there would be a gaping hole in Manhattan as a result.
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Here are the highlights. Nvidia reported…
Go ahead and change your pants now. If you’re like me, you already need a new one.
?
We thought the ~50% revenue growth in 2022 and 2023 would be enough, but little did we know Nvidia was just warming up. Absolutely ridiculous, but now that we know the numbers, let’s translate.
What Does This Mean?
Nvidia is now the 3rd largest company on planet Earth, behind only Microsoft and Apple and just ahead of Saudi Aramco. This egregious growth has largely carried them there, but now the age-old Wall Street questions come into play:
Both questions are related, and they’re equally impossible to answer.
Operating cash flow ballooned as well, with quarterly OCF growing 411% vs 2023 and the annual line item bursting 397% as well.
This has helped Nvidia grow its cash pile just under 2x from the same period last year. So, anyone expecting the firm to run out of steam is sorely mistaken because now Nvidia has the cash to invest—in itself or in the next itself—they’ve got plenty of chances to do so.
Overall, the takeaway here is that Nvidia continues to live up to its sky-high expectations. Whether or not that means it’s time for you to buy the stock depends on your portfolio and life in general, so please stop asking me. Just cross your fingers and hope for the best like the rest of us.
Other semi-stocks seemed to get a little bit of the reward as well, ticking slightly higher in the after-hours to ride the wave.
We’ll say it again—Wow.
Now, go get as high as Nvidia’s share price, especially if you’re a shareholder.
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?? The Big Question ??: What’s next for Nvidia? Is this the last quarter of egregious growth? If not, what will drive the continuation going forward?
Banana Brain Teaser ??
Yesterday ??
On a certain transatlantic crossing, 20 percent of a ship’s passengers held round-trip tickets and also took their cars aboard the ship. If 60 percent of the passengers with round-trip tickets did not take their cars aboard the ship, what percent of the ship’s passengers held round-trip tickets?
Answer: 50%
Today ??
A certain university will select 1 of 7 candidates eligible to fill a position in the mathematics department and 2 of the 10 candidates eligible to fill 2 identical positions in the computer science department. If none of the candidates is eligible for a position in both departments, how many different sets of 3 candidates are there to fill the 3 positions?
Send your guesses to [email protected]
Wise Investor Says ??
"Smart people focus on the right things" — Jensen Huang
How Would You Rate Today's Peel??
??All the bananas ? ? ? ? ? ? ? ? ? ? ? ? ???Meh ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ??Rotten AF
Happy Investing,
David, Vyom, Jasper & Patrick