"Tech Trade Guilty Until Proven Innocent?" Examining NVDA Earnings' Ripple Effects

Next-Gen investing. I'm Alex Coffee. Jenny Horne has the day off. It's time to welcome in our next guest. That's Dennis Dick, the chief market strategist for Stock Trader Network. Happy Friday to you, Dennis. Nice to have you on the show to discuss a really important topic. That topic of course, is tech earnings and all the information that we've had to absorb this week. I'm just looking in real time if my numbers are right. Technology. The 67 names in the S&P 500 combined for an aggregate growth of just shy of 75% year over year, which is just extraordinary to say the least. But we had a big one this week that was Nvidia. I think we should start there. Dennis, what did you learn from Nvidia and what do you know. What do you think that means for the stock now going forward. I mean we're pretty much through tax season now. It's been like you were saying fantastic results. The borrower may be too high on some of these companies like Nvidia was unbelievable yesterday. So obviously they had the report. It was it was a good report. But then the guidance when they started the call saying that they're looking at revenue growth of 70% up to 2028. Some analysts were sitting down at like 45% revenue growth. So then the stock just blasted. We're looking at 210 2122152. And then just obviously continuing to go higher from that point in time and got up to 229 yesterday. And then we get Marvell earnings last night. And it kind of pulled the rug out from the tech trade because Marvell is obviously down 10% here today and Nvidia has followed suit. Nvidia is actually quietly giving back half of its gains from yesterday currently trading at 218. So you'd say the initial reaction. Fantastic for Nvidia but not the follow through. And that's something we've seen this entire month. It's kind of been the contrarian month where if you're chasing moves you're not rewarded. But if you're playing fade trades where you're shorting rips and buying dips, that's what's been working in the month of August. I want to talk about CrowdStrike. But before we do, one of the things that was really cited regarding Nvidia was like, oh, coming into this report down for the last earnings reports, basically the entire last year. But what I thought got overlooked was if you were to look at the last two years and then you were going to say, hey, where was it one month after the earnings report? It was actually down a month later. Seven of the last eight quarters coming into this one, even with this big move down 4% here today, as you said, giving back about half of or even more than half of those gains, not out of the question that we have another sort of liquidation event into this tremendous liquidity. That earnings kind of provides Nvidia investors. Well, I mean, just give it perspective here. Nvidia, which has been your AI leader, the leader, the company that's in the pole position, the company that's charging forward 70% revenue growth. You think this company is just exploding. The stock must be exploding as well. That hasn't been the case. If we go back to one year ago, Nvidia one year ago was $212. It's $218 today. So I mean we really have gone nowhere with Nvidia. It's been the other stocks the Micron's and the Sandisk's that have taken over and been your leaders here in the last year. So Nvidia has just been quiet consolidation here. Some people believe it's consolidation to go higher. Some people think you know it's obviously you know a crowded trade. Maybe it's on crowding to a certain extent here too. But you know the stock the company performance has been unbelievable. But the stock performance has been muted. So I mean really the last year of Nvidia's gains just are not there. And do you think that's because one of the things I was often saying I'm curious what your thoughts are on this is I always say, hey, what moves stocks is the surprise more than the numbers themselves? Is it just really hard for Nvidia now kind of law of large numbers to really surprise, despite the fact that I think they did a really good job of trying on Wednesday afternoon. I mean, how do you grow a $4 trillion company trying to come to 5 trillion, 6 trillion? It's a lot easier to grow a company like AMD. You know, when we were talking about this last year setting out $500 billion market cap, you know, it's easier to grow when you're this large. It's hard to grow and you have to get into everything. And that's why Nvidia is talking about getting into robotics, talking about spreading out, trying to really get into everything. Because how do you grow a $5 trillion company? You've got to get into everything. I mean, this has been, you know, it's not just an Nvidia problem. I mean, Apple's growth. Yes, the stock has performed okay. But really you know the revenue growth once you're this large it gets tricky. So that's the Mac seven. And if we just look back even the Mac seven it's picked it up here in the last little while. But really the Mac seven has been underperforming to this market has been driven by the memory names by the Sandisk's and the Micron's. And a lot of other tech trades have actually lagged over the course of the last year. So when we enter September, you know, things will change. Obviously we're in holiday trade. For a lot of traders, August is typically one of the slowest weeks of the year. So maybe when they vote in September and the institutional money manager comes back to their desk, maybe they come in with their rah rah, let's go into the year end with the tech trade on. But you know, right now, I would say this tech trade is guilty until proven innocent because even those leaders that we had, like the Micron's and the Sandisk's are starting to show that they're starting to get exhausted. Buyer exhaustion coming to these names. I mean, SanDisk up 200% in the last year. These stocks are going to have a difficulty continuing to go higher simply because everybody's already long. All right. Let's talk CrowdStrike because you talked about, hey, some of these tech trades aren't necessarily being rewarded. But one area that has within software pretty consistently, you know, maybe Zscaler has been cyber security. It seems like we're questioning maybe less. So post Salesforce this week, the role software is going to play and maybe how well those margins are going to be. But no one wants to question cybersecurity. And it's probably because the numbers have been so good. What did you make of CrowdStrike? I mean, the numbers were fantastic. The stock had an awesome reaction. And then today we get a little bit of a hangover. You get the initial move. Again, we've seen this time and time again through the summer. The stocks get the initial boom, and then there's not a lot of follow through. That could be a seasonal thing, but it also could be a sign of buyer exhaustion. I mean, CrowdStrike in the last four months has doubled. So we go from 110 to 220. It's already had a lot of the gains priced in. So it could be the fact that maybe the bar was just a little bit too high. And that's why we're pulling back here a little bit this morning. But you think going forward, in a world that's going to be dominated by AI, think about what Cloudflare CEO was saying, you know, a month ago, talking about internet traffic being 1000 times more AI agents for every human being that's on the internet by 2030. I mean, you think about where AI is going, the need for cybersecurity is going to be there. So, you know, maybe there's going to be some competition coming for CrowdStrike, Palo Alto Networks from sources we don't even know. But with that being said, the need for this space is going to be very apparent because there's going to be AI is going to help, you know, obviously a lot of companies be more productive efficiency, but there's also going to be bad actors that are using AI. And I think those bad actors, you know, be trying to hack into your computer, steal your information. So the need for CrowdStrike and Palo Alto Networks, which reports next week, is not going away. Yeah. And you know, next week we're going to get Dell, Palo Alto and Broadcom I believe. And basically we're going to wrap up the earnings season for technology. Now those three are going to headline things. They're going to be joined by NetApp HPE and Sienna sort of round out the tech sector. But you know we mentioned Marvell. Its counterpart in some ways is sort of Broadcom. We mentioned CrowdStrike. Its counterpart in many ways is Palo Alto. Do you expect much surprise from any of these names next week. I think the earnings will be fine. It's a matter of the reaction to the earnings. And as traders you always want to know how they react because sometimes you can have a great earnings report and the stock can go down and people will say well how is this possible. It's just a matter of like, was there a high bar going in? Has the stock been running? Was the stock sitting in the gutter like a stock like Avgo actually has a lower bar because this is one that's come off the high significantly here, $495. The all time high is 366. It's been kind of sitting near the lows not doing much here. So the bar is actually a little bit lower for an Avgo where in if you look at Palo Alto, it's the opposite. Palo Alto was $190 stock back in May. Now we're talking about a $370 stock. The bar is really high for Palo Alto. So you could have both reports and both could beat and both could raise. But the Palo Alto network has to beat. You know, it has to have a greater report here because the bar is simply higher. So, you know, always when you're going to report the numbers are one thing, but the bar is everything. You know, as a market strategist, someone who's looking at things and assessing things through a trader lens as you do. Dennis, one of the things that I, that I think is, you know, if it hasn't been hammered into, you know, market participants yet, it should be is that volatility at the headline index level just is not telling us the story. We got a fix that's sub 15. But if you were to look at the VIX which is the average component volatility, it's still even coming down now through most of earnings. Season 35. And you talked about you know some of these names. I mean we talked about Marvell. It's down 10% today. You talk about Nvidia not even having earnings. Today is down 4%. CrowdStrike is pulling back. The moves under the surface are tremendous as this rotation just continues to happen. How are you navigating that. Well you've got to change because we don't get in everything sell off anymore and we don't get in everything rally anymore automatically. And they're selling Nvidia. They buy Apple. Why? It's kind of like a staple your cell phone. I mean everybody's got one. It's more defensive. So it trades more with the staples. And we know if we look today you've got a bit of a tech wreck obviously thanks thanks to Marvell last night. But if you look at what stocks it's not red across the screen. If I'm looking half of them are green. What's up. Berkshire Hathaway kind of the anti AI portfolio that Greg Abel has built. Some banks are trading higher. You have some software names like Microsoft and Apple or Apple obviously hardware but technology trading a little bit higher. So even rotation within tech is there. Netflix moves opposite the market. It seems like almost every day. And if you're going to sell Nvidia off you might as well buy Amazon. It's trading up 3.5% today. Two it's not the type of market that just sells everything or buys everything. It's like if they're buying something, they're selling something off. Even when we're trading these reports, you know, when we see Nvidia start to rally, I might think, okay, let's go short some staples because we know the staples will probably be down tomorrow if Nvidia is going to be strong. I mean I don't know what it takes to get the market to like move together again. But the S&P is insulated because of all this rotation. And I don't think that is going to change anytime soon. I love this conversation. I wish we had more time because I think it is the story of the market. I've been planting the flag that it happened on April 29th. If you had to pick a day. And that was when a bunch of those mega-cap tech firms really depleted their free cash flow. And those two trades have been at odds since. But Dennis, we'll have to continue that here soon. Appreciate it as always for you taki