We get Nvidia earnings tomorrow.
And we'll go in with the stock trading around the same levels as its January earnings event.
But as you can see, it returns to these levels after a 35 percent drawdown, which took almost three months to recover.
And in this chart you can see the post-earnings declines, which have become the pattern of the past few earnings events.
The February earnings event came with a big one – an 11% decline.
Why?
As we've discussed along the way, Nvidia data center revenue has been telling a very clear story. There's a supply issue.
The growth in data center revenue has been on a rhythm of about $4 billion a quarter since the second half of 2023. And this means the trajectory Nvidia's revenue growth rate continues to be down.
However, the backlog of demand for Nvidia's most advanced chips is only getting bigger and bigger.
Remember, just a few weeks ago the Trump administration was said to be considering allowing Nvidia to sell a million chips to the UAE. That would be a $30 billion deal. For context, Nvidia probably did $40 billion in data center revenue last quarter.
And the American tech giants are already lined up with hundreds of billions of dollars committed to buy as many chips as Nvidia can supply them.
So, halting and reversing Nvidia's declining growth rate depends entirely on bringing new global manufacturing capacity online.
It's underway — in the U.S.
But when will it come online?
It sounds like mid-next year, at the earliest.
Until then, the path for Nvidia trend revenue growth would fall below 50% (chart below).
But with 56% net income margins, the stock would get cheaper and cheaper along the way. The forward PE (on an annual revenue run rate) would be in the mid-20s by mid-next year on the current $3.3 trillion valuation.
