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While American chipmaker Nvidia Inc’s (tickr: NVDA) earnings release for Q3 2024 (or «FY 2025» in their reporting convention) wasn’t a disappointment, its share price instantly plunged 2% in after-hours trading with an overall «deceleration» in share price growth imputed in its forward trajectory. However, while Nvidia’s stock shows early signs of a downtrend, associated sectors such as AI and semiconductors are displaying a more nuanced behaviour.
Trend AnalysisIn terms of revenue, Nvidia’s line item trends have plenty to cheer. At 9 months («9M» or three quarters) of FY 2025, revenue and gross profit for the entirety of the Fiscal Year (FY) is trending to close at nearly twice that of the previous FY. FY 2024 itself was a landmark period wherein the stock’s massive breakout began after the balance sheet doldrums of FY 2023.
Operating expenses, on the other hand is also poised to about 30-40% greater than the previous year while stock-based compensation (SBC) is poised to close at around 50% higher on the back of the stock’s massive climb. Despite the company’s net income per share trend (after restating to nullify the 10:1 stock split made earlier this year) showing a comfortable doubling over the previous year, it is still very, very far from the dizzying 586% gain it posted in FY 2024.
Curiously, though, the company’s much-vaunted edge via its newly-developed Blackwell chip suite finds precious little mention in its earnings release beyond a statement that Foxconn will bring into operation three factories to manufacture the GB200 Grace Blackwell Superchips. The Blackwell chip suite generally is twice the size1 of the company’s previous offering but is purportedly 30 times faster at tasks like ChatGPT-like applications. However, industry journals report that Blackwell chips are overheating when used in datacenter servers despite iterated redesign tests of the server racks.
This might be why, unlike as of the first half (H1) of FY 2025, the company’s inventory levels have shown a somewhat-drastic shift over historical trends.
Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at
Source: Company Information; Leverage Shares analysis
While finished goods remain steady in the present and near levels established over the past two FYs, the work in-process (WIP) levels register a 36% increase over the same period while raw materials register a 29% decrease.
If Nvidia’s chips are to be considered a step ahead of the likes of its leading rivals, Blackwell would have been a second step. If Blackwell looks shaky, the likes of AMD as well as other upstarts such as Sambanova have now gained time to level the playing field. This is the downside of gaining a «corporate» base: performance matters a little more than the «brand» while other issues can potentially be ironed out via discussions, collaborations and joint ventures.
While the company has assured investors that problems in the Blackwell suite have been ironed out already2, adoption trends are running a little light.
Market ActionsAnalysts at large banks expressed convictions in Nvidia that the market didn’t seem to resonate with immediately after its Q3 earnings release. However, many of the same analysts also expressed an overall bullishness in the prospects of the larger space occupied by semiconductor companies and AI-relevant stocks – both of which intersect significantly with Nvidia’s products.
If the iShares Semiconductor ETF (ticker: SOXX) were to be considered as a proxy for the semiconductor industry and the iShares Future AI & Tech ETF (ticker: ARTY) as a proxy for the AI-relevant sector, the performance of Nvidia’s stock (which presently accounts for about 10% and 6% of the holdings in both ETFs respectively) after its earnings release can be contextualized further.
Source: Leverage Shares analysis
While Nvidia’s holdings weight did serve to drag both ETFs in the course of the share price’s decline immediately after the Q3 earnings release, the rest of the components in both ETFs served to buoy both trajectories to net outperformance since. When Nvidia started early signs of a recovery in December, the other components of both ETFs conceded some accrued gains.
While Nvidia’s stellar growth over the past calendar year might lend cause to some investors piling on at an early signs of a bullish trend, assertions made by analysts about the attractiveness of the AI and chipmaker spaces – as a whole – seems to be validated.
In ConclusionAs it stands, the bulk of market conviction principally rests on the company’s Blackwell suite, which is instrumental on securing new datacenter buildouts. The company’s substantial presence in existing datacenter operations, meanwhile, would only face pressure during said datacenters’ replenishment cycles which are highly variable. While being one step ahead of its rivals gives it an advantage currently, the lead times to replenishment cycles gives its rivals an opportunity. If all issues related to Blackwell are smoothed out and client uptake is strong, there is potential for a repeat of FY 2024 in FY 2026. In FY 2025, however, it’s presently unlikely if Blackwell will have a massive presence.
Meanwhile, the overall draw of the AI and semiconductor spaces remains strong and resilient. Given how heavily Nvidia features in the mix favoured by investors in these spaces, however, tactical investors in either trajectory direction, meanwhile, are likely to have several field days for the rest of the year as well as the first quarter of 2025.
In addition to the Nvidia ETPs in either direction, professional investors in Europe may also consider the 3x Long Artificial Intelligence ETP (ticker: GPT3) as well as the 3x Long Semiconductors ETP (ticker: SMH3) for tactical exposure to potential upside in these respective sectors. In a similar vein, the -3x Short Artificial Intelligence ETP (ticker: GPTS) as well as the -3x Short Semiconductors ETP (ticker: SMHS) are available for investors seeking inverse exposure to potential downside.
Professional investors can also considered the likes of the Nvidia IncomeShares ETP (ticker: NVDI), which is akin to a covered call strategy on the stock and generates monthly income distributions based on the stock’s trajectory.
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