đ§ Why Nvidiaâs Record Earnings Didnât Send the Stock Soaring
Nvidia crushed earnings with soaring revenue, record profits, and a $60B buybackâso why did the stock fall? Hereâs the psychology behind the selloff.
Hey friend,
Last week, Nvidia posted one of the strongest earnings reports in corporate history.
Revenue soared 56% year-over-year. Net income nearly doubled. They announced a $60 billion buyback programâone of the largest ever. And they projected $54 billion in sales for next quarter (and it doesnât even include the H20 chips earmarked for the Chinese market).
By every measure, thatâs a phenomenal earnings report.
And yet⌠the stock still fell 3% over the next 2 days.
What? Shouldnât great numbers = a higher stock price? This is one of those market moments that illustrates why investing isnât just about numbersâitâs about psychology.
The Numbers Donât Lie (But They Donât Tell the Whole Story)
Nvidia beat both top-line revenue and bottom-line earnings per share. Wall Street cheered the numbersâ39 professional analysts raised their price targets, expecting shares to hit $212 (with more bullish expectations of $250).
So whyâd the market sell off?
The Plot Twist Nobody Saw Coming
Hereâs where it gets interesting. Iâve heard three theories as to why the market acted like a disappointed parent:
Theory #1: Data-center sales were softer than investors expected, igniting fears that AI growth is slowing.
Theory #2: The US government continues to enforce chip restrictions on China, making investors nervous about future growth.
Theory #3: Whispers of an âAI bubbleâ are making investors hypersensitive to any âless than perfectâ results.
Honestly, all three of those are valid. However, none of them are warning signsâinvestors are misinterpreting the data.
Hereâs What Really Happened: Perfection Became Nvidiaâs Enemy
Markets always price in expectationsâitâs called investor sentiment. And Nvidia has been so consistently spectacular (beating estimates nearly every quarter since 2020) that Wall Street now expects them to walk on water.
When its data-center revenue came in slightly lighter than expected at $41.1 billion instead of $41.3 billion, investors heard âdisappointmentâ instead of ârecord-breaking,â as the report indeed smashed records, yet again.
Thatâs why stocks can fall after outstanding reports. The bar was already set sky-high for Nvidia, and anything less than perfect feels bigger than it isâand it says more about human psychology than it does about Nvidiaâs business.
Todayâs Free-Subscriber Takeaway
Hereâs the golden rule to remember throughout your investing journey: Short-term price moves often say more about expectations and investor psychology than reality.
As a long-term investor, your goal isnât to fixate on those short-term price swings. Itâs to ask the bigger question: Is the growth story still intact? (Weâll dive deep into that answer tomorrow).
Whatâs Next for PRO Subscribers
Tomorrow in PRO, I'm sharing what most investors completely missed in this earnings report:
The hidden growth drivers that nobody's talking about
Why the China situation might actually be a blessing in disguise
My 12-month outlook for Nvidia investors (and it might surprise you)
Hope you'll join me and our PRO community for tomorrow's exclusive deep-dive.
But even if you stop reading here, remember this: Stocks don't move based on what actually happenedâthey move based on what the market thought should happen. Master that distinction, and you'll understand 90% of seemingly "irrational" market moves.
Keep learning,
âď¸ Isaiah from Earn Out Loud
P.S. Got questions about this Nvidia situation? Hit replyâI read every email and often feature the most intriguing questions in future articles.