CNBC Daily Open: Nvidia underpromises and wildly overdelivers

Patrick T. Fallon | Bloomberg | Getty Images

This report is from today's CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

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Nvidia's stunning earnings
Nvidia's earnings are just incredible and beyond expectations. Second-quarter revenue doubled from $6.7 billion a year ago to $13.51 billion; it was up 88% from the first quarter. Net income jumped from $656 million to $6.119 billion — that's billion with a "b" — year on year. Furthermore, Nvidia thinks sales in the current quarter will surge 170% on an annual basis. Shares climbed around 7% in extended trading.

Markets rebound
U.S. stocks rose Wednesday, buoyed by a drop in Treasury yields and anticipation over Nvidia earnings, which came out after the bell. European markets closed higher, with the regional Stoxx 600 index adding 0.39%. Meanwhile, European government bond yields fell after weak economic data made traders reassess the euro zone's interest rate trajectory.

India lands on the moon
India successfully landed its Chandrayaan-3 spacecraft on the moon Wednesday, making India the fourth country to do so, after Russia (then the Soviet Union), the U.S. and China. More impressively, India landed its spacecraft on the moon's south pole, the first time for any country. The feat signals India's entry as a national superpower in space.

Prigozhin in plane crash?
Russian state media reported the chief of the Wagner Russian mercenary group Yevgeny Prigozhin died in a plane crash Wednesday. However, it was not immediately clear if Prigozhin was in the aircraft, which was flying from Moscow to St. Petersburg. Prigozhin last appeared in a video that seemed to be filmed in Africa, published Monday by Wagner-affiliated channels.

[PRO] Stocks can get over 'August sloppiness'
Tom Lee, head of research at Fundstrat, thinks investors should buy stocks now. What about the fact that markets have been slumping over the past three weeks? Well, Lee thinks it's just "August sloppiness" at play — here's why he's convinced that stocks will rally soon.

The bottom line

Major U.S. indexes posted impressive gains Wednesday. The S&P 500 rose 1.1%, the first time since June 30 it's had a gain of more than 1%. The Dow Jones Industrial Average added 0.5%. The Nasdaq Composite increased 1.6% for its third consecutive winning day.

Sentiment in stocks was helped by dropping U.S. Treasury yields. The 10-year Treasury yield slipped around 14 basis points from 4.33% on Tuesday to 4.19% on Wednesday.

On an ordinary day, those movements would have been the focus of investors and commentators. But it's not an ordinary day. It's Nvidia's day — and what a blockbuster day it is.

A year ago, Nvidia CEO Jensen Huang promised investors the company is "navigating our supply chain transitions in a challenging macro environment and we will get through this."

It wasn't just corporate CEO bluster. Just look at the numbers Nvidia reported. Compared with a year earlier, Nvidia had a 101% jump in quarterly revenue. And a 422% … leap? expansion? — what's the right noun to use here, even? — in net income. Those figures don't typically crop up in earnings reports.

It was a "'drop the mic' moment … that will have a ripple impact for the tech space for the rest of the year," said Dan Ives, senior equity research analyst at Wedbush Securities.

Sure, as mentioned earlier, Nvidia disappointed last year. Comparing with a low base always helps to make percentage increases look more impressive.

But consider this: Nvidia's second-quarter revenue beat not only its own expectations — an immodest (but apparently realistic!) 50% higher than Wall Street's forecast back then — but also that of analysts.

In other words, Nvidia has been underpromising and overdelivering, as CNBC's Robert Hum puts it. Therefore, Nvidia's forecast of a 170% jump in current-quarter revenue, compared with a year ago, might in fact be too timid. Hum goes on to suggest that it's possible that, three months later, Nvidia reports revenue of $18 billion to $19 billion, rather than the $16 billion Nvidia said it expects.

Shares of Nvidia climbed about 7% in extended trading today, pushing its price north of $500. But this echoes Nvidia's own propensity to underpromise and overdeliver, because it's all but certain its share will catapult even further tomorrow when markets open.

— CNBC's Robert Hum contributed to this report

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