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- Lemonade | February 22nd 2024
Lemonade | February 22nd 2024
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[ good morning ]
Here’s everything you need to know today
The madman actually did it. Nvidia stood tall amidst all this market scrutiny and posted revenue growth that actually lived up to the hype.
Every market cycle—there is one unfathomable stock that pulls off brain-breaking growth no matter how overbought it seems. Thousands of bear investors have burned tens of billions of dollars trying to short names like this—but this economy hates pessimism more than anything else.
For the last 5 years, Tesla was that company. No matter how impossible their growth targets were, bears were wiped out trying to short the name. Now, shorting Tesla is easy money while the company burns billions trying to will a visual full self-driving algorithm into existence and build humanoid robots.
Nvidia has done the near-impossible and taken on the mantle of bear-breaker. Once again, the AI revolution has (temporarily) proven itself with Nvidia somehow growing their revenue over 265% year-over-year (YoY).
The rest of the market is honestly in turmoil because a revenue miss followed by a quick, broad correction would make more sense. But now, the AI market has an even stronger foundation and even wilder price action is set to follow. Eventually, some names will fail to live up to market expectations and fall. But for now, the music is playing louder and faster than ever and bulls are in firm control of the price action.
So, let’s unpack Nvidia’s astonishing results and see what other big moves the market is making.
Markets at a Glance
*Market data based on standard trading hours and calculated close to close
[ semiconductors ]
Nvidia Stuns the Market With AI ‘Tipping Point’
No matter how high expectations get—Nvidia finds a way to crush them
BREAKING NEWS
After days of wavering—markets have turned full-parabolic once again after Nvidia confirmed the astonishing scale of AI their AI demand. Is the market running hot, or are we witnessing a profound transformation of the economy?
WHAT HAPPENED
The scale of the growth here is really important to highlight. Nvidia generated $12.2 billion of net income from $22.1 billion of revenue. That means revenue skyrocketed 265% YoY while net income ran near-vertical, growing 769% since Q4 2022. That’s not a typo—it’s just an unfathomable level of earnings growth.
HOW IS THIS EVEN POSSIBLE?
Nvidia is simply experiencing an astonishing amount of demand for any kind of AI service or chip they can offer. Data Center revenue made up most of these gains, growing 409% YoY to $18.2 billion. Limited supply is helping convince clients to pay even more for AI Data Center infrastructure—but that’s not enough to account for that net income growth.
With how enormous the cost-savings are on the enterprise side, Nvidia has added a lot of new services to their offerings in the last 3 months. In particular, Nvidia has rapidly expanded their offerings for medical and biotech players—including a new kind of data center for Amgen and a new API service that can help process medical imaging. While data centers can get produced very efficiently, services are always going to be massive margin generators. Enterprise players who can’t muscle their way into the data center market can at least pay more in the short term to build AI advantages that still net tremendous cost savings.
At the same time, Nvidia’s other businesses are also growing revenue and becoming more efficient. Nvidia’s scale here is only going. to accelerate as the company invests more and more in faster production and more robust services.
WHY IT MATTERS
Honestly, Nvidia missing expectations and allowing the market to correct a little bit would have been easier for the market to wrap its head around. Now, we’re in a situation where Nvidia keeps clearing the bar for growth no matter how sky-high it gets. Is this the moment we finally understood that AI was about to fundamentally transform our economy? Or are we going to look back in two years and laugh at just how much money credulous enterprises were willing to burn on overblown AI promises?
It’s genuinely hard to say—but for now, the scale is enough to keep the rally moving. Nvidia jumped 13% in early trading on the news. That means they added over $210 billion dollars to their market cap in a few minutes. That’s the entire value of McDonald’s. In minutes. Nvidia is now comfortably the 3rd most valuable company in the world and rushing towards a $2 trillion valuation. What else is there to say?
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Sectors at a Glance
| Sector | Day | Month | Year |
|---|---|---|---|
| Communications | -0.11% | 4.24% | 45.63% |
| Consumer Disc. | 0.74% | 2.50% | 22.47% |
| Consumer Stap. | 0.36% | 3.11% | 1.12% |
| Energy | 1.88% | 7.52% | 3.03% |
| Financials | 0.30% | 4.07% | 11.22% |
| Health Care | 0.22% | 3.97% | 11.52% |
| Industrials | 0.40% | 4.22% | 17.24% |
| Materials | 0.55% | 3.14% | 6.40% |
| Real Estate | 0.73% | -1.20% | -0.98% |
| Technology | -0.63% | -0.99% | 45.67% |
| Utilities | 1.32% | 2.16% | -7.72% |
*Market data based on standard trading hours and calculated close to close
[ electric vehicles ]
Rivian Initiates Layoffs as Demand Crashes
EV demand can turn on a dime it seems—and Rivian has suddenly lost confidence
BREAKING NEWS
Rivian fell hard this morning as management cut guidance for 2024 production. Despite initiating stiff cost controls that include 10% layoffs—the market has completely soured on the electric vehicle market.
WHAT HAPPENED
Rivian beat revenue expectations and made a lot of progress toward profitability, generating a $606 million loss from $1.3 billion in revenue.
However, the good news comes to an abrupt halt there. Rivian posted a pretty wide miss on deliveries—only delivering 13,900 vehicles in Q4 after hitting 15k in Q3. Basically, Rivian wasn’t able to deliver as many service vehicles to Amazon in Q4 while they focused on holiday deliveries. With regular consumers pulling back from the EV market, the bull case for Rivian relies more and more on big contracts with enterprise players like Amazon.
HARSH REALITY
The Street had high expectations for Rivian despite the wider EV slowdown. Analysts were hoping Rivian could boost production to 81,000 vehicles in 2024.
Instead, Rivian has been so focused on building their advanced plant in Georgia that they need to cut costs and reduce quotas. Rivian now projects they’ll barely be able to build 57,000 vehicles this year—which is less than 2023 and well below expectations.
In response to this, Rivian is cutting 10% of staff and focusing on more efficient production. But that’s not enough to assuage the market’s fears.
WHY IT MATTERS
While this is a tough blow for Rivian and the EV market—right now it appears to be more reflective of a regular pattern we’ve seen where companies are trying to temper expectations after a strong Q4 2023. Rivian’s guidance is way more conservative than those trends and the pullback is well-deserved here—but EV production can turn on a dime and Rivian can easily surprise to the upside after this, especially as the brand expands enterprise partnerships beyond Amazon. Still—Rivian still crashed near 20% in early trading.
[ biotech ]
Moderna Surges on Surprise Profit
Can the mRNA king mount more of a comeback?
BREAKING NEWS
Despite COVID-19 vaccine sales continuing to crater—Moderna shocked the market this morning after deferred revenue and cost-cutting led to the company posting a profit in Q4. Can they keep this up?
WHAT HAPPENED
The market expected Moderna to continue to languish in Q4 with an anticipated loss of about $1.00 per share. So, analysts were caught off guard when Moderna netted a strong $0.55 EPS from 2.81 billion in quarterly revenue. This came in spite of a 43% decline in vaccine revenue.
LONG WAY TO GO
Since Moderna’s profit came from deferred revenue from programs they had completed in the past—it was pretty easy to post a profit. Moderna management said their profitability here was a ‘nonevent’ and that the real exciting news was how they managed to beat their cost of revenue expectations by over $300 million. Moderna is becoming more and more efficient—which is a huge development as the company prepares for their blockbuster RSV vaccine to get full approval in Q2.
WHY IT MATTERS
Moderna also maintained their guidance for 2024—meaning they have a lot of confidence in more approvals coming down the line. With COVID-19 investment basically in the rearview mirror, Moderna has enough projects in their pipeline to mount a comeback to their wild 2021 highs. The stock popped 6% in early trading as The Street doesn’t anticipate they’ll be able to keep those profit numbers up.
Extra Moby Snacks
Bagholders worldwide rejoiced as the Japanese Nikkei hit a new all time high for the first time since 1989. Even though the Japanese economy technically entered into a recession, growth prospects are still looking great to investors.
After a really strong run—Etsy continued to decline this morning after the company simply could not control costs enough. Etsy easily beat revenue projections, but couldn’t generate profit growth to match. The stock dropped over 6% in early trading.
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