Nvidia's stock fell about 2.25% that day, wiping out most of its gains for the month after a brief run of momentum. The earnings report is the "Super Bowl" of tech results.
The Nvidia (NVDA) bull case
I still like Nvidia (NVDA). It sits in a trading range and could break out; it hit resistance back in May. Analyst estimates skew much more to the upside than the downside. The one analyst with a sell rating set a target not far below the current price, while a recent analyst put a $500 price target on it. About 95% of analysts covering the name rate it buy or strong buy.
I treat Nvidia (NVDA) as a value play within tech. It trades not much more expensive than the broad market, and it carries a gross margin near 75%.
Over the last eight quarters, Nvidia (NVDA) beat and raised guidance every single time. Even so, the stock was lower the day after results in six of those eight quarters, and lower a month later in seven of eight. The technical setup is different this time, since the stock has traded sideways for much of the year.
When does the growth fade? That is the real question investors are asking - when growth slows from 50% to something like 30%. The answer: this capex cycle is really an upgrade cycle, swapping old data centers for new ones. AI demand will not fall off a cliff next year or the year after. There is still a long runway. Nvidia (NVDA) sits at the center of the "picks and shovels" trade. It will not knock the cover off the ball the way it did a few years ago when this was all new, but it remains a stable earner with more room to run.
How the portfolio is built
The models focus on diversifying factors, so Nvidia (NVDA) gets a maximum weighting of 2.5%, not the 6% to 8% that would be more standard. The portfolio holds 60 to 70 names and is quant driven, looking at multiple factors. Top names like Nvidia (NVDA) get 2% to 2.5%; many others get a 1% holding.
Other tech and AI holdings: Microsoft (MSFT), Broadcom (AVGO), Palantir (PLTR), Intel (INTC), and Micron (MU), plus some quantum exposure. Intel (INTC) was bought when everyone hated it, and it has done well. Micron (MU) has been trimmed several times because of its volatility.
"Boring is beautiful." The portfolio also holds insurance companies, banks, and Campbell (CPB) - stable names that rarely show up in the media. Some of these are coming out of a long downtrend and turning around, which is where a lot of money gets made. Momentum and value are both improving for some of them. Staying diversified, rather than owning everything that has current momentum, has worked well.
The energy bottleneck
Energy ties directly into the AI buildout: powering the data centers popping up everywhere. The portfolio keeps energy exposure light and close to the market's sector weights. Holdings include TotalEnergies (TTE), Constellation (CEG), and a small position in one nuclear name that was reduced due to volatility.
An HVAC company in the portfolio performed as well as some tech names and had to be trimmed a couple of times. Industrial and energy names have started trading almost in lockstep with tech. From a risk management standpoint, that overlap is a reason to avoid too much exposure when the names all start looking the same.
