NVDA

NVIDIA is having an outstanding year as a business and a mediocre one as a stock. Last quarter it did $81.6 billion in revenue, up 85% from a year ago, and keeps about 75 cents of every dollar as gross profit. For the full fiscal year it earned $120 billion. The company is buying back another $80 billion of its own shares and has locked in $119 billion of supply to meet demand it already sees coming. Meanwhile the stock closed July at $200.75 — about 15% below its May high and up only 6% for the year. That gap is the entire story here. The reason isn't NVIDIA. Nobody seriously doubts they can sell chips. The worry is about the customers. Companies like Microsoft, Amazon, Google, and Meta are spending enormous sums on AI data centers, and investors have started asking when that spending turns into actual profit. There's also an awkward wrinkle: NVIDIA invested $18.6 billion into private AI companies last quarter, and some of those companies turn around and buy NVIDIA chips. That's money going out the front door and coming back in the front door, and it makes people nervous about how much of the demand is real. In late July, chip stocks lost over a trillion dollars in market value on exactly these fears. Here's the thing we'd want anyone to understand before buying it: owning NVIDIA isn't really a bet on NVIDIA. It's a bet on whether the whole AI buildout keeps going. We've looked at four companies in this space this week — Celestica, Credo, Coherent, and NVIDIA — and every one of them beat expectations and got sold anyway. They all move together, on the same news, for the same reason. So if you're buying several of them thinking you're spreading out risk, you aren't. You're making the same bet four times. NVIDIA is the best business of the group by a wide margin, and it's also the purest version of that single bet. Next earnings report is August 26. Watch what the big cloud companies say about their spending — that matters more here than anything NVIDIA reports. (written with the help of Claude)