The Focus This Week: Nvidia’s Latest Update

Analysts and investors are predicting big things from Nvidia’s third-quarter update on Wednesday: namely, a big jump in profits and $32.9 billion in revenue – almost double last year’s $18 billion. They know there are three big trends fueling Nvidia’s rise: surging demand for its AI-optimized chips, booming interest in its networking tech, and strong data center sales growth.

Nvidia’s cutting-edge graphic processing units (GPUs) are, after all, the backbone of the AI boom. Its top-of-the-line Hopper models – like the H100 and H200 – are engineered to handle the most advanced AI tasks, powering everything from chatbots to image generators. They process massive data loads in record time and keep AI applications running smoothly, so it’s no surprise demand is off the charts as more and more industries look to bring the technology under their own roofs.

Meanwhile, Nvidia’s Spectrum-X networking tech – which connects GPUs in data centers – powers lightning-fast data transfers and helps companies make their AI infrastructure faster and more efficient. This technology is in high demand, especially as cloud giants like Amazon, Google, and Microsoft pour their considerable resources into data centers that can handle their heavy processing needs. It’s no wonder Nvidia’s data center business is making it rain too.

That said, Nvidia’s got its challenges. Supply chain issues leave the chipmaker struggling to keep up with demand, and the ramp-up of Blackwell – Nvidia’s next-gen GPUs – could squeeze margins in the coming quarters, with its steep production costs.

And it’s worth bearing in mind that Nvidia’s stock trades at around 35x its expected 2024 earnings, and potentially above 50x its 2025 earnings. That means there’s not much margin of safety if things don’t quite measure up. Nvidia may well keep beating expectations, but the stakes nonetheless are high: any signs of slowing demand could prompt a quick reset, freak some investors out, and bring the share price down. High reward, high risk.

On The Calendar

• Monday: Nothing major.
• Tuesday: Canada inflation (October). Earnings: Walmart, Medtronic, XPeng.
• Wednesday: UK inflation (October). Earnings: Nvidia, NIO, Palo Alto Networks, Snowflake.
• Thursday: Eurozone consumer confidence (November). Earnings: Baidu, Deere, Intuit.
• Friday: Japan inflation (October), UK retail sales (October), eurozone PMIs (November), US PMIs (November), US consumer sentiment (November).

What You Might’ve Missed Last Week

Global

• Bitcoin’s latest rally pushed it above the $90,000 mark for the first time ever.

US

• Consumer prices rose at a modestly faster pace in October.

Europe

• European stocks lagged behind US ones by the most since 1995.

Why It Matters

Bitcoin has rocketed more than 30% since the US election, smashing through the $90,000 barrier for the first time last week. A mix of factors is fueling the frenzy. For starters, traders have been betting on pro-crypto changes from the incoming US administration, which has floated ideas like a national bitcoin reserve and looser regulations. Plus, there’s been increased buying from big institutional investors, with some viewing bitcoin as a hedge against inflation and fluctuations in traditional currencies. And then there’s good old FOMO playing a role. But don’t be afraid to be skeptical: DOGE tripled in value after Elon Musk was tapped to lead the “Department Of Government Efficiency” (yes, that’s DOGE), and that suggests hype might be playing more than just a minor role.

US consumer prices rose by 2.6% in October compared to the same time last year – up from 2.4% in September. And the so-called core measure, which excludes the cost of more volatile things like food and energy, held steady at 3.3%. The numbers were still well higher than the Federal Reserve’s 2% target, and already some investors are on edge about what the president-elect’s proposed tariffs and growth-focused policies might mean for the future of inflation. If nothing else, it’s a reminder that the “last mile” in this inflation battle may be tricky

US stocks hit a new milestone, outperforming their European counterparts by a wider-than-ever margin. Specifically, the S&P 500 was up 25% so far this year, compared to the 5% climb seen in Europe. The widening gap wasn’t a complete surprise: Europe’s economy was already looking shaky, and the potential for new tariffs and trade tensions could add even more pressure. Still, investors are now paying a record 70% valuation premium for US stocks over European ones, with some of them betting on a raft of new market-friendly policies to come. It’s worth keeping in mind though that markets have a habit of surprising folks, and high expectations don’t always match reality.