As Nvidia (NVDA) prepares to report earnings after the closing bell on Wednesday, Randy Frederick, veteran market strategist and founder of RandyFrederickMedia.com, joins Morning Brief to explain how the chip company’s results could have a impact on the market.
“AI is going to change things as much as the Internet did 30 or 40 years ago,” Frederick says, emphasizing the importance of Nvidia’s chips in this area.
He explains that Nvidia is in a strong position and that if the company doesn’t meet expectations, “one weak quarter won’t make AI disappear, and it’s not the end of the world.” He adds that the company still has a lot of upside potential and that a potential decline in the stock could be a buying opportunity.
For more expert insights and the latest market action, click here to watch this full episode of Morning Brief.
This article was written by Mélanie Riehl
Video transcription
The main American indices are approaching their closing record highs, before the publication of NVIDIA results on Wednesday.
A lot depends on this report.
The tipping giants account for about a quarter of this year’s S&P 500 returns.
So far we’ve been talking about it because of NVIDIA and here we have the results of NVIDIA reporting after Wednesday to explain everything this means going forward.
We want to bring in Randy Frederick, founder of Randy Frederick media.com, Randy.
It’s great to have you here.
So tell me about what we’re seeing here, which is that we’re at record levels.
The current focus is on NVIDIA.
How important are these results for the overall market?
Well, NVIDIA has been big for a very long time.
Obviously, we all know about AI, it is still in its infancy, but it is not going away any time soon.
And I think many people and I share this opinion: AI is going to change things as much as the Internet did about 3,040 years ago.
So it’s very, very important.
And as you said, that’s been a key part of the overall growth of this market.
But as Jared said earlier, there are plenty of signs that things are going pretty well.
But often things get a little ahead of schedule.
And I think maybe we’re at that point, right.
Right now, is there a risk for the crowding that we’re starting to see in some of the generative AI exchanges right now, there’s definitely a risk there.
And again, remember year 2, uh, 1998, 1999, 2000, when almost every company in the world added.com to their name so everyone could pay attention to it, and then many of their actions have doubled, tripled, quadrupled. , was even multiplied by 100.
Um, this sort of thing happens to a certain extent.
Now you have a lot of companies that have changed their name to AI, something AI that’s out there somewhere or that they’re talking about.
Oh, yes, we do AI too.
But it’s really important to separate the companies that are talking about AI and saying yes, we’ll be involved in AI from the companies that are actually creating it or actually using it to do real things.
And you really have to do some research to make sure what the difference is, you know.
Nvidia is obviously a company that makes an I, it creates hardware that makes it work.
But a lot of other small businesses are talking about it.
In many, many cases this is simply a me-too pylon for attention, which is important for investors to do real research from reputable sources to ensure they get this information .
You know, talking to a 22 year old on Reddit is probably not the best place to get investment advice on things like this Reddit.
However, we see one video missing the mark.
How much of a narrative shift we can expect for the entire market, it’s probably not as big as you might think.
I mean, it’s definitely going to hurt this stock, but there’s a lot of upside to it being able to give up a lot of that and still be ahead of itself, because even a weak quarter won’t disappear an I and this is not the case. the end of the world, it will continue.
So even though things are getting a little bit overheated and so there’s a reset or a correction almost like you would see in the stock market in general.
It’s not a terrible thing.
This is probably a quarter setback.
And actually, we’ve seen this in a lot of companies, they’ll have weakness for a month or two in the long run.
I would consider things like this as buying opportunities.
This doesn’t mean borrowing all the money, all the money.
You can get your hands on the truck, save it and buy everything.
But this is a very good opportunity to add a little bit to your position.
If you have one or if it’s something that you’re thinking about doing, you’ll probably need to add a position, um, when these kinds of things are happening right now, the market is at an all-time high or just a few points away . far from there.
You need to look for buying opportunities when we have dips.
And like I said, I think we’re probably on the verge of one right now, Randy, I’m looking at some AI options data that shows an implied move or an expected move of about 9%. after the profits here.
What should this company say about not only last quarter’s earnings and revenue, but also the guidance for the rest of this year and, and how many legs it still has left in this broader demand profile that it’s seeing? right now, for degenerative AI, this has added a whole new catapult to their own success.
So there are two things to point out: One of the options markets is quite effective in predicting the movement of stocks.
But keep in mind that when you say 9%, it’s up or down, options don’t necessarily predict the direction.
They predict volatility or the magnitude of movements.
So you might see a big move up or down, the company just needs to keep doing what they’ve been doing all along, show they’re executing, show they’re growing, just to show that she continues to do so. to do, to get things done.
But again, if for some reason the data isn’t stellar and, again, expectations are very high, maybe there would be a slight pushback.
But to be completely honest, most of my career has been spent reading the tea leaves of the options markets and to some extent the futures markets and this type of forecasting is actually quite accurate long-term.
So Whitney, where do you see this investment opportunity right now?
Given that you think we’re about to experience a slight pullback, then perhaps it would make sense for investors to put their money to work at this time.
But where?
Well, reality.
Yes, again, so um, the whole expression that you’ve heard many, many times over many years: sell in May and walk away.
Surprisingly, that’s not entirely accurate, but there is some truth to it.
So the belief that you should leave Maine and return in September is false.
Yes, the market performs less well between May and September than between September and May.
But in the whole legal term, it’s not a negative turnaround period, it’s just a positive, slightly lower return period.
But if you look at what happened in May and I’ve studied these numbers, I’ve shared them with you for the last 24 years.
We experienced a decline during May 23 out of those 24 years.
Sometimes it was as little as 2%.
Sometimes it was much bigger than that until now.
This month we’ve only had one slowdown, about one and a half percent.
And this happened, you know, on the very first or second day of the month, there’s a very good chance, based on historical trends, that we’ll see a decline here over the next couple of weeks.
Now, this doesn’t mean I’m bearish in the medium term or even long term.
In fact, I think that by the end of the year, the S&P 500 will be a few 100 points higher than where it is today.
But that’s where you look for opportunities.
If we get that traction as I expect over the next few weeks, this is again an opportunity to add to positions that you own, that you like or possibly take positions that interest you and frankly sectors that performed well. so far.
It is likely that this year will continue to be the same as the one that continues.
The ones I would be cautious about are things like real estate that are already underperforming.
Randy Frederick, market strategist and founder of Randy Frederick media.com.
Excited.
Thank you very much for taking the time this morning.
You bet.
Thank you for.
