Nvidia: Can It Sustain its Stock Performance to Remain the Star of the Year?
Nvidia's remarkable success continues as its shares surge by 220% this year, making it the top performer in the S&P 500 Will this upward trend persist?
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It's an understatement to say that Nvidia has had a successful year. The California-based chipmaking company has witnessed a remarkable 220% increase in its shares, making it the top performer in the S&P 500 stock in 2023.
Will the sixth most valuable company in the world see the same success next year?
Before Thanksgiving, Nvidia dispelled any doubts about its declining popularity by reporting impressive third quarter earnings.
The company's revenue increased by 34% from the previous quarter and 206% from a year ago. They also increased their forecast, expecting continued positive results. The AI firm predicts their revenue for the final quarter of the year to reach around $20 billion, surpassing analysts' projections of approximately $17.8 billion. However, there is a growing sentiment on Wall Street that Nvidia's dominance may not be sustainable and that signs of weaknesses are starting to emerge.
There are concerning signs for Nvidia as the company's executives are selling off a collective 370,000 shares of stock, totaling approximately $180 million in November, as reported by the Washington Service, a data and analytics company.
Should all the shares registered for sale in November be successfully sold, it would mark the highest monthly insider aggregate selling at Nvidia since December 2021. In terms of value, if fully realized, November 2023 would see the highest monthly value of stocks sold by company insiders in its history, as stated by Hannah de Wolf, lead of business and product development at the Washington Service.
Notably, no executive or director acquired shares of the company's stock during the same period.
The company's outlook has been dampened by the recently imposed export restrictions on chip exports to China, potentially impacting future profits. Nvidia's CFO Colette Kress expressed concern about the negative effect on their China business and the uncertainty surrounding the long-term impact of these export controls during a recent press call.
Additionally, the issue of maintaining momentum arises. Is it possible for a company with a market capitalization of $1.2 trillion to sustain exponential growth?
"We are familiar with the recommendation to promise less and deliver more, but if people begin to anticipate this as the norm, it can backfire," noted Steve Sosnick, chief strategist at Interactive Brokers. "This is something we have come to expect with NVDA."
Nvidia has managed to stay current by taking advantage of the AI trend, similar to how they capitalized on the cryptocurrency trend. As Sosnick recently noted, it's accurate to liken NVDA to a supplier of essential tools during both the cryptocurrency and AI gold rushes.
According to Sosnicks, Nvidia executives emphasized AI at least 70 times during their latest earnings call. He noted that the term was brought up 37 times before the first question was even asked. Embracing AI could potentially prolong Nvidia's success into the new year, as Wall Street remains optimistic about profiting from artificial intelligence and the possibility of another tech revolution similar to the 1990s.
Dan Ives of Wedbush recently stated that AI is seen as the most transformative technology trend since the start of the Internet in 1995, and many are still underestimating the projected $1 trillion of AI spend over the next decade. This is expected to be a significant opportunity for the chip and software sectors, with Nvidia leading the way.
According to Goldman Sachs analysts, Nvidia is projected to have a 34% upside over the next 12 months, with a price target of $625 per share (currently trading at about $452). Piper Sandler analyst Harsh Kumar also believes that the company is undervalued compared to its potential, and its upward trajectory is not yet complete.
Sarat Sethi, managing partner at DCLA, stated on CNBC that Nvidia is a great company but in order to sustain its valuation, it needs to grow by 30% per year. He also mentioned that for this to occur, people would need to continue paying the same prices with the same profit margins, increased demand, and no new competition. Although he believes it's a good stock to own, Sethi advised investors not to allocate too much of their portfolio to it due to its volatility.
Historically, Nvidia has had hard falls after misstepsbetween 2021 and 2022, shares of the stock fell by 66%. "You need to be prepared," said Sethi.
Unknown traders appear to have anticipated October 7 Hamas attack, research finds
Israeli company shares saw a notable increase in short selling activity before the October 7th Hamas attacks, indicating that certain traders may have been aware of the upcoming terrorist incident and capitalized on it, as per a new study published on Monday. The research, which comes from law professors at Columbia University and New York University, notes an "unusual" surge in short selling activity five days prior to the attacks in the leading fund associated with Israeli companies. Short selling involves betting against the value of a security. This research has not yet undergone peer review.
The short selling of the MSCI Israel Exchange Traded Fund (ETF) in the days leading up to the October 7 attack surpassed the activity seen during the Covid-19 pandemic, the 2014 Israel-Gaza war, and the 2008 global financial crisis, according to the study.
The authors of the paper concluded that traders who had prior knowledge of the impending attacks capitalized on these unfortunate events.
Former SEC commissioner Robert Jackson Jr., who is now a professor at NYU, and Columbia law professor Joshua Mitts co-authored a paper titled "Trading on Terror?" Their research revealed that just five days before the Hamas attack on October 2, almost all off-exchange trading volume in the MSCI Israel ETF consisted of short selling.
Before the attack, traders seemed to foresee the impending events, as stated by the professors. Mitts, one of the authors, expressed in a phone interview with CNN that, due to the restricted availability of public trading data, it is "highly likely" that there was additional trading occurring behind the scenes. "We are only scratching the surface," Mitts stated. "There is a substantial amount of activity that we are unable to detect, but which regulators should investigate."
Mitts and his co-author Jackson express great confidence in the exceptional and extraordinary nature of the trading activity, which they believe surpasses over a decade of trading. The authors currently lack information on the traders' identities and affiliations with financial firms, government entities, or terrorist organizations, and advise against jumping to conclusions.
Mitts stated that linking it back to Hamas is purely speculative and they are not making any suggestions in that direction. He added that there are many possible explanations, including the potential that someone may have overheard something and acted on it.
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Senators urge US-EU deal to avert tariffs on whiskey
A few weeks ago, Before the Bell wrote about a threat to the $5.1 billion American whiskey industry.
The EU, the biggest market for American whiskey exports, plans to implement a 50% tariff on imports of the popular liquor starting January 1. Advocates in the spirit industry warn that this could severely impact the growing sector of the US economy. The tariff is part of the EU's retaliatory measures against the US in response to a disagreement over steel and aluminum trade.
A bipartisan group of lawmakers, headed by Democratic Senator Catherine Cortez Masto of Nevada, penned a letter to the Biden administration on Tuesday, urging officials to resolve the EU dispute before the end of the year to prevent potential "dramatic" harm to the industry. Senator Cortez Masto emphasized the significant impact on Nevada, stating, "The American spirits industry sustains over 19,000 jobs in Nevada and injects billions into our economy annually. I urge the administration to take action to eliminate these harmful tariffs on American exports and support American workers."
The letter, exclusively shared with CNN, was signed by 12 US Senators, including Indiana Republican Todd Young, Virginia Democrats Tim Kaine and Mark Warner, Kentucky Republican Rand Paul, Minority Leader Mitch McConnell, Tennessee Republicans Bill Hagerty and Marsha Blackburn, West Virginia Democrat Joe Manchin, Kansas Republican Roger Marshall, and Alaska Republican Katie Britt.
"Spirits have had a significant cultural impact in our country and currently have a profound effect on the US economy. In 2022 alone, US distilled spirit exports reached $2.06 billion. But the impact of the retaliatory tariffs was devastating... Our belief is that the imposition of additional tariffs on this industry is detrimental," the senators wrote.
"There are mutual benefits in finding a path forward, and our belief is that spirits and wines are a point where there can be consensus to limit the damage for all parties."
