Wall Street Breakfast
Nvidia's solid earnings, jobs expectations and fighting inflation
Fri, 28 Feb 2025
Nvidia's solid earnings - steady as she goes (0:26). More chip and cybersecurity earnings coming next week (2:25). Tesla's slide (3:55) UnitedHealth, DOJ probe, and Medicaid cuts (5:30). Jobs expectations and fighting inflation (7:20).Episode transcripts: seekingalpha.com/wsb.Show links: UnitedHealth sends Medicare insurers lower after report on DoJ probeElon Musk’s DOGE agents said to have gained access to Medicare systemsAMD unveils next-gen graphics cards for gamers, challenging Nvidia dominanceSign up for our daily newsletter here and for full access to analyst ratings, stock quant scores, dividend grades, subscribe to Seeking Alpha Premium at seekingalpha.com/subscriptions.
Chapter 1: How did Nvidia's earnings impact the market?
Brian Stewart, our director of news at Seeking Alpha. Welcome back to Wall Street Breakfast. Great to have you as always.
Great to be back.
Talk to us about where we sit, what you're most focused on, what you think the market is most focused on.
We're professionally bound to talk about NVIDIA at the start. The earnings just came out. The stock is down about 4% after earnings. The earnings themselves were very solid, beating expectations, stronger than expected guidance, but the stock is still down a bit. To be fair, the stock was up a bit beforehand. It was up about 4% the day before its earnings report.
So this is kind of just giving back that free earnings enthusiasm. I think the general feeling is steady as she goes. NVIDIA is about 20%, 25% off of its highs. So the idea is we're not in bubble territory yet for the AI, but there is sort of signs of slowing growth. The NVIDIA data center revenues, that's the area that's very AI focused. That showed 93% growth.
this last quarter, which obviously is very strong, but it's down from 112% growth in the previous quarter. And that number was in the 400% range a year ago. So you're seeing kind of the peak of AI growth passed for NVIDIA. And so the question is sort of where is that growth number going to settle in?
The only thing I note in terms of just general stock performance is that chips are down generally. And this isn't even just in response to NVIDIA earnings. This is over the past week. So we have AMD down 9%. ARM is down 10%. We'd kind of flagged Arm as a good AI bellwether just because it was part of the growth plan that people had put in place. And then Broadcom and Micron are also down.
So I don't think it's a NVIDIA-specific story. I think this is a market referendum on the AI situation in general. So I think that it's kind of TBD about where things are going. I think for the most part, people are happy to just tread water at this point and wait for more data.
And what else would you take in terms of anything to extrapolate broader speaking for maybe how investors see upcoming earnings for any similar players?
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Chapter 2: What is the outlook for chip and cybersecurity earnings?
Yeah, so next week we have Broadcom coming out on Thursday. We have Marvell as well. So there is going to be some data points in the chip area on the horizon. So those are two key areas to look for for next week. If we broaden the lens a little bit and look for technology in general and not just chips, we have a bunch of cybersecurity companies coming out next week.
I think the biggest of those is going to be CrowdStrike. CrowdStrike is down... was down sharply last year after its highly publicized outage in July, but has crawled back above those levels recently. However, it reached a 52-week high early this month, but it's seen a dip lately.
So I think those earnings are going to be key for CrowdStrike specifically about whether or not it's sort of moved past that outage and is back to sort of regular business as usual.
And then I think just looking at cybersecurity in general, I think that's an interesting place to look for technology in general, but also as we look at the new Trump administration spending priorities, whether or not companies with strong public balance sheet, as you will, strong governmental revenues, whether those companies are worried about cuts coming up.
Chapter 3: What factors are contributing to Tesla's decline?
Any other names in the tech sector that you'd care to highlight at this point?
It's a good time to kind of peek in on Tesla. It's down 19% in the past week. This is part of a general slide. It's down 30% year to date and 42% from its 52-week highs late last year. There's a lot of worry about the Elon Musk distraction. He's busy with Doge. And not only does that take him away from running Tesla, but it's also becoming not a great look in general. There's talk of...
of boycotting Tesla, there's just becoming a very high profile and not particularly well-liked presence at this point. There's also been data this week from a European industry group, the European Automobile Manufacturers Association said Tesla sales in Europe were down 45% in January. That could be a sign of dissatisfaction with Musk specifically.
Overall, EV sales were up in Europe in the same data set. So the fact that Tesla was down so sharply might be something very Tesla related. The fall has brought Tesla below $1 trillion in market cap for the first time in November. So you can kind of see the upside and downside of his close association with the Trump administration.
You saw Tesla rally sharply after the election, but now that there's much more controversy around his activities in relation to the government, you're starting to see that having an effect on Tesla.
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Chapter 4: Why is UnitedHealth's stock facing challenges?
You certainly are. Much more discussion in the marketplace around how Elon Musk's companies are faring because Elon Musk is in charge. Speaking of public sentiment and people in charge, there's some discussion around insurance company this week due to proposed Medicaid cuts. What would you highlight in that regard?
Yeah, United Health was down 9% this week. As you said, the proposed Medicaid cuts are starting to raise red flags. That's a big part of their business. There's also a DOJ probe of its Medicare billing practices. So the stock in general is down 14% since early February. So this is starting to seep into the market, the idea that there's less government support in general.
Another example is Palantir. There's concerns about the budget cuts have sort of taken some of the air out of that stock. It was up 24% after its earnings report in early February, but has recently had a five session losing streak. And that was a pretty dramatic drop. Each of those five sessions, it was down 3% and then two of them or a 10% or more drop.
So you're starting to see, even if it's individual companies or sectors, starting to see kind of the ripple effect of budget cuts that are being put into place, or at least the proposed budget cuts. And then in general, you can kind of, if we take it back to a more macro level and look at the economic data, people are starting to get worried about the economy in general.
Chapter 5: How are proposed budget cuts affecting the market?
We saw initial jobless claims jump to a multi-month high in the most recent data. And so you're starting to see worries about layoffs. This is critical ahead of next week's jobs data, which is a little backward looking. But still, I think people are going to be looking at that really closely to see if the cut in public jobs is starting to have a broader economic impact.
What's the sentiment or expectations heading into that?
I think they're starting to lower a little bit. The job market has been one of the bright spots. As we've been fighting inflation, the fact that the job market has held up as well as it has, has sort of given the Fed permission to kind of take the inflation fight more seriously than it could otherwise if it also had to worry about the economy.
But if you have an economy that's starting to show some cracks, it puts the Fed in a real bind because if it cuts rates to protect the economy, then that could unleash the inflation goblin. But if you fight inflation, you might undermine any attempt to jumpstart the economy. So you end up in a situation where the Fed is sort of stuck between a rock and a hard place.
Chapter 6: What economic indicators are causing concern?
Troublesome data point that affected the markets this week is the Conference Board's Consumer Confidence Index dropped to 98.3 in February. This was down from a little over 105 in January. That's the biggest monthly fall since August of 2021. Anytime you're saying biggest whatever since the COVID shutdowns, you're probably in sort of frightening territory. So one of the...
Sub-indexes in there is the expectation index dropped 9.3 points to 72.9. That's below the 80 mark. That's usually seen as a recession red flag. So you see consumers in general are just starting to look around and see high inflation, see an economy that doesn't seem to be... be as solid as it once was, and they're starting to get worried.
Next week, there's a lot of retailers on the earnings docket. So in terms of getting a vibe about what consumers are thinking, I think those earnings reports are going to be important. One of the key ones is Costco. They're coming out Thursday. The company is recently off a 52-week high. It's gotten a lot of run in the fact that it's a low-price company. competitor.
And so it brings in a lot of people who are worried about inflation and looking to find deals. Those are your Costco customers. But with the increases come valuation concerns. So there's worries of whether Costco can keep up the momentum that it's had. And then elsewhere, you have a lot of department stores like Macy's and Nordstrom's and then other clothing retailers like like Gap are reporting.
So like I said, to get an idea of the spending habits of the general consumer, I think taking those reports sort of in aggregate would be a good data source.
Anything that you're sensing going into those reports or anything that you're hearing from analysts going into those reports?
Well, the biggest preliminary to the waiver reports that's coming that we had was the Walmart earnings, which sent the stock down a little bit. There was just sort of worries that it couldn't keep up the momentum it had. Walmart's in sort of a special case because it has the benefit of size plus... the low price kind of business plan kind of works well in an inflationary environment.
So companies that have sort of a higher price level like Nordstrom's, it'll be interesting to see whether or not they can kind of still draw people in or whether people are sort of looking around for cheaper deals.
And another data point to be drawn from that, and this will be more from the conference calls and other commentary from management, is just whether or not there's concern about tariffs and whether or not that's going to interrupt
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