NVIDIA & AI.
NVIDIA dominated the market news this week, with its results being reported after the bell on Wednesday. Analysts expected earnings of $0.64 per share and $28.8 billion revenue. The actual earnings were $30 billion, the eps $0.68. The outlook was upbeat, and they announced a $50 billion share buyback. All good news. The stock went up, right? Wrong.
Traders & indicators
NVDA closed at $125.61 on Wednesday, then dropped 6% to close at $117.99 on Thursday. Why? No-one knows for sure, but it is probably a combination of too-high expectations, profit-taking, traders being twitchy and a chart signal.
NVDA dropped below its 50 day MA, which could have triggered automatic selling by traders. Even if it wasn’t automated, many traders have in their trading strategy to sell if the stock drops below the 50 day SMA.
As I say in the books, there’s no magic in indicators; it is knowing which indicators traders follow and act on that makes them work.
NVIDIA BuyBack
I understand that NVIDIA share buyback is going to be conducted on the open market, so they are probably not too bothered by the drop in price; the shares will be cheaper to buy back!
Why NVIDIA?
Why am I banging on about NVIDIA? Partly because it is the third largest company in the U.S (by market cap) and as such has a large effect on both SPY and QQQ, but another reason is the future of AI. NVIDIA and AI re inextricably linked, as its advanced GPUs (Graphic processing units), originally designed for rendering images in video games, have become essential for AI tasks. NVIDIA is the largest supplier of GPUs, with 80% of the market, with AMD having 15-20%.
Is AI going to continue to grow?
As of 2024, 77% of companies are either using or exploring the use of AI in their operations, and 83% of companies now consider AI a top priority in their business strategy. Does this sound like it is going away any time soon? My guess is that the AI revolution is going to be every bit as significant as the Internet.
Above is Amica, an advanced robot using AI – follow the link – he / she is extremely lifelike. And this is 3 years old!
AI Energy usage
One fly in the ointment is energy. AI is a very heavy user of energy. In 2022 it accounted for 2% of the US electricity, and this is expected to increase to 8% in 2026. Right now, there is no official move to reduce AI due to energy concerns, but my guess is that it is only a matter of time.
However, compared with Ireland, the US consumption is hardly worth talking about. Data Centers running AI models currently consume over 21% of Ireland’s total electricity, expected to rise to 32% by 2026. The Irish government has rejected Google’s plans to build a new data center and is considering further restrictions and regulations.
The Presidential Election
<just joking>
To the markets . .
A bit of an uneventful week – but, hey, we can do with a little bit of peace after the shenanigans of August. We seem to be in a consolidation phase, which is to be expected before (hopefully) heading for new highs.
And the NVIDIA strangle we looked at last week – well, good that we didn’t go for it, it would have expired worthless!
SPY Charts
Well, as we predicted, SPY has been consolidating (going sideways) for a couple of weeks and is bumping up against resistance at the previous high of $564.
On the longer term chart, we can see that the uptrend is holding:
SPYG Charts
SPYG has not recovered as well as SPY as it is more influenced by tech stocks which got hammered in the recent dip. It is still not near its high of early July, and is also consolidating. It seems to be encountering resistance at the level it reached in mid-June.
And on the weekly chart we see the uptrend is still intact.
QQQ Charts
QQQ is exhibiting the same pattern as SPYG.
The weekly chart is more interesting; it is exactly at the bottom of the trading range that we drew in a couple of weeks ago. What we are hoping is that it bounces off this and heads north again. Let’s hope so.
VIX Chart (Volatility)
The VIX has settled down after its recent conniption.
ITMeter
The week ahead. . .
Well, we are out of the earnings season, thank goodness. And we have a quiet week news-wise. Let’s enjoy it.
The Futures
Down slightly, but still 11 hours to market open.
Fingers crossed for a good (or at least peaceful) week!
Heather
14 thoughts on “NVIDIA & AI”
I find it offensive ( just joking ). What exactly is the market? Is it large institutions buying and selling? Peter Lynch stated a chart is a great predicter of the past. In 2008 the only ppl that knew the banks were in trouble were the banks. NVDA has 80% of the market for now ( until the rest catch up ). As a retail investor I’m just riding the wave… and just curious what the ocean is?
R
Randy! My heart dropped when I read you first sentence – I thought ‘what have I said now?’
Thank goodness you were joking.
Peter Lynch saying that a chart is a great predictor of the past – very true. But it is all we have to go on for the future.
And re what the market is – I think it is just a great ocean of people (even institutions are made up of people) all being swayed this way and that by their emotions. And people en masse are relatively predictable and we have the chart of their emotions – we just have to learn to read it and extrapolate.
Thoughts?
h
Hi Heather,
I know you most likely haven’t back tested this but I was wondering if you ever considered using spyv in combination with spyg to more closely emulate spy? For a smaller account you could get into both for about $5000 right now which is much lower that spy IMT options. G is selling for about $79 and V for about 52 compared to over 500 for spy. Just something I have been considering for myself and would be interest in what you think of it.
Also I want to thank you for this website, blog and charting software, it is truly a blessing to have a unbiased place like this to get information.
Jim
Hi Jim,
(just for everyone’s information, SPYV is an ETF that tracks the S&P 500 Value index, which is stocks in the S&P 500 that are considered undervalued.)
I have looked at all the SPY* ETFs, and dismissed most of them for lack of liquidity. Low liquidity, which means that the spreads can be very wide – which means you will probably have to buy too high and sell too low.
For example, an ATM March 25 bis/ask on SPYV is 1.40/2.65 which is a massive spread of almost 90%, whereas an ATM Mar 25 SPYG is 5.40/5.65 which is a lot less.
SPYV has a very limited number of options, and the lowest DITM for March 2025 is at 67% strike ($35) whereas for SPYG we have the full range from $40 (51%).
So – good idea in theory, but I can’t see how to implement it with these figures.
Hope that helps.
h
I am a Bear from here on out or until proven wrong. I have been wrong many times but I try to always remain flexible. But I have been rarely wrong over the long term.
My weekly Charts don’t look very good. My Copper Chart is Bearish to say the least. Warren Buffet has been selling massive positions in long term major positions like AAPL and BAC and making no purchases to speak of. Warren is 94 I think but he has infused his Successors and his Company with his Methods and Culture so that even if he has not been making all of these decisions he has his stamp on them. Funny how he has always had huge amounts of Cash to spend at Market Tops and Bottoms.
Hey Tommy, after Tuesday I can understand anyone deciding to be a bear! It was truly horrible.
Re Buffett – his advantage is his longevity in the market as he started at age 11. There is a really interesting study about how his wealth would be if he was like most of us – starting around age 30. To wit:
Warren Buffett is famous for starting his investment journey at a very young age—he bought his first stock at 11 and had accumulated around $9,000 by the time he was 20. The study often referenced suggests:
Buffett’s Actual Wealth at Age 65: When Buffett turned 65 in 1995, his net worth was approximately $30 billion.
If He Started at Age 30: If Buffett had started investing at age 30 instead of in his early teens, he would have had significantly less time for his wealth to compound. By age 65, under the same annual returns, his wealth might have been closer to $11.9 million—not billions.
We can all be brilliant traders in hindsight, but not all of us can trade for 83 years!
h
I find it offensive and demeaning you haven’t offended or demeaned someone… lol
Anyway… just curious – let’s say for sxxxs and giggles that the 10 day moving average is crossing into bear territory ( crossed the 200 day moving average ) and we’re now into Bear territory, I looked at Puts and could only find deltas into the .88 where as i can find deltas in the .99 for buying Calls. Can you enlighten… thanks in advance
R
Ps I find it sad ppl can’t agree to disagree and still be cordial.
Hi Randy – you caused me to snort my coffee up my nose! I do love a good laugh.
Tuesday was terrible, and I am not logging into any accounts today, it will only depress me. I can work out in my head how much they will be down and its not pretty.
Re the bear – the 10/200 cross is not the signal for a bear market – we have to drop 20% before this starts, which will be $452, and we are a long way off that. A death cross will happen before that as the 200 SMA is over $510 now.
So I think it is a bit early to be starting to look at puts? Maybe I have misunderstood, pls get back to me if so.
h
Thanks for keeping your analysis clean and simple! I always keep in mind the “waves” and the “tide”. Brilliant!
Blake
Thank you Blake! Much appreciated!
h
A BIG fan here after voraciously consuming the contents of your three books: ITM bull, ITM bear and timing the market. You are an angel. I feel very lucky to have stumbled on your books. God bless!
Jolly
Hi Jolly – Thank you! I don’t think I have ever been called an angel before, but I’m lovin’ it!
x
h
I love reading your books and your blog. Keep up the good work.
Floyd
Thank you Floyd, very much appreciated!
x
h