The spotlight this week is firmly on Nvidia’s earnings. I expect the company to surpass expectations in both sequential revenue and earnings. However, I don’t anticipate the market to remain as enthusiastic as it has been in recent quarters. Over the past two years, Nvidia’s earnings and sequential revenue have grown at an extraordinary pace, averaging around 100% year-over-year increases. Looking ahead to the next fiscal year, analysts currently project revenue growth at approximately 33%. While this is typically impressive, it’s a significant deceleration compared to previous growth rates.
It’s worth noting that Nvidia’s margins were slightly smaller last quarter. Institutional investors often interpret narrowing margins as a sign of increasing competition. Although the AI chip market remains exceptionally robust and is likely to stay healthy for years, the era of Nvidia posting 100% sequential growth is likely behind us. This shift in trajectory is shaping how institutions perceive the stock.
We might see a modest bump in the market following Nvidia’s earnings release, but I expect any rally to be short-lived. Institutions are likely to adjust their portfolios in anticipation of policy shifts under the incoming administration. As a result, the ongoing market consolidation is expected to persist.
Looking ahead, I don’t see a significant short-term catalyst to drive the market higher until next month’s Federal Reserve meeting. Market conditions remain stable, but institutions are adopting a cautious, “wait-and-see” approach regarding potential policy changes tied to campaign promises.
The biggest challenge for markets in 2024 could be the 10-year Treasury yield. If it approaches the 5% threshold, it may create headwinds for the bull market.
Upstart
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As for Upstart, don’t get overly excited. about the recent upward movement in the stock. Yesterday’s trading volume was extremely light, likely reflecting traders covering shorts in anticipation of positive Nvidia earnings. I expect further consolidation in Upstart. However, if you’re a skilled trader, this stock presents excellent opportunities for short-term trading.