Nvidia’s earnings report last night measured a new headwind blowing up against the big AI stocks.
Don’t panic.
At least, not yet.
Yes, growth is slowing down. What can you expect when you have 50% growth happening year over year over year?
At some point in time that stops.
We’re seeing the first signs of that with Nvidia reporting a slowdown in AI server revenues – but that’s hardly reflected in the market price yet.
Nvidia’s market cap is already more than that of all UK stocks, and is now closing in on the market cap of all of Japan!
However, when everything has already priced this massive, massive growth rate and it needs to be readjusted, you got revaluations.
That’s normal. To be expected.
That’s also why big tech companies can post great growth numbers, even as they’re moving to reduce their employee headcount.
And that’s kind of where we are right now in the AI world, whether it’s Nvidia or Palantir.
Think of it as a highway. The highways have been built and they’re continuing to be built, but the bulk of it is out there. Now. It’s all the businesses at the off-ramps. It’s all the shopping centers, all the movie theaters, all the things that superhighway enables all those services. That’s where we are right now.
All of these secondary businesses are going to grow.
Not a moment of panic, but you should beware the AI trend, as Sam Altman noted, it’s bubbly.
From the hardware perspective, we’re more on the down slope of growth, heading more towards the 20%, 25%, and away from the 40%, 50% levels. And that means some new pricing reevaluations.
An AI pullback will trigger associated pullbacks in the coming weeks.
But we’ve got the rate cut potential impact further out, which should cause AI stocks to trend even higher going into the end of the year.
~ Andrew Zatlin
P.S. from Addison: That insight from Andrew Zatlin is just a small appetizer for the main event: our discussion on Grey Swan Live! shortly.
We’ll cover how Andrew views the labor market, why he’s been more accurate than other forecasters – garnering the #1 ranking on Bloomberg – and look at how his views fit in with many of the potential Grey Swan events we see occurring in the months ahead – including the possibility of a “most terrifying bull market.”
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