Semicon's Next Move Post-NVDA earnings
On Thu, 29 May 2025 morning, after going through $NVIDIA(NVDA)$ Q1 2026 earnings, I thought it was safe to assume that the chip leader will close on a high by end May.
Afterall, it has beaten Wall Street’s estimates for both top and bottom lines. (see below)
NVDA’s Earnings.
As per LSEG estimates:
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Revenue: surged to $44.1 billion vs $43.31 expected vs Q1 2025’s $26 billion This marked a +69% YoY gain.
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Earnings per share (adjusted): came in at $0.96 vs $0.93 expected vs Q1 2025’s $6.12 (pre 10-for-1 stock split). This is a +56.86% YoY gain.
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Net income: was $18.8 billion vs Q1 2025’s $14.9 billion, recording a +26.17% YoY gain.
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Gross margin: was 61% or 71.3% (exclude H20 charge) vs Q1 2025’s 78.4%,
The good results came even though Nvidia took a $4.5 billion loss because US export restrictions prevented Nvidia from selling its customize H20 chip to China.
Quarter Guidance / Outlook.
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For Q2 2025, Nvidia revenue guidance was $45 billion vs LSEG estimates of $45.9 billion, registering a marginal decline.
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Revenue guidance would have been $8 billion higher if US government did not restrict H20 chips sales to China.
Coupled with a “continous” cooling set of inflation numbers, the prospect couldn’t have been brighter right ? (see below)
Cooling Inflation.
On Fri, 30 May 2025, the other US inflation report - US’s Personal Consumption Expenditure (PCE) report for April 2025 was released before the start of trading day.
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Headline inflation increased +0.1% for the month, putting the annual inflation rate at 2.1%.
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Core inflation also was at +0.1% for the month but marginally higher on an annual level at 2.5%.
This is consistent with a cooling US’s Consumer Price Index (CPI) report released in early May 2025. (click here ! for the details).
Trump’s Reciprocal Tariffs timeline:
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On Wed, 09 Apr 2025, Trumps’ reciprocal tariffs came into effect.
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On Wed, 14 May 2025, they were halted for 90-days for negotiation between affected countries and US.
Although Trump’s worldwide tariffs were effective for a month before they were halted, it did not lead to an inflation surge as predicted by analysts.
This is because, most US importers have imported more than usual earlier in March 2025 to help lock-in the “before tariffs” supply.
This helped to mitigate the rise in prices for April and until March 2025 import supply runs dry.
This also implies US central bank logically should not be considering, cutting interest rate in the coming June 2025 FOMC meeting because actual impact of US inflation is still unknown.
Tariffs Headwind Again.
What I did not and could not anticipate was another round of tariff unrest, stirred by Trump on Fri, 30 May 2025. (see below)
Again, this shook and caused panic in the US market again because (a) everyone knows, the turbulence that is about to unfold and (b) the 50% tariffs would take effect on Wed, 04 Jun 2025.
More importantly, it is a direct blow to US manufacturers, including (a) semiconductor equipment makers and (b) fab operators who rely on specialty steel for clean rooms and chipmaking tools.
Analysts have already estimated this could increase Capex costs for US fabs by +2% to +4% in the coming quarters.
Immediately, equipment makers ( $Applied Materials(AMAT)$, $Lam Research(LRCX)$) and US-based foundries ( $Intel(INTC)$, $GLOBALFOUNDRIES Inc.(GFS)$ ) face margin pressures from higher steel costs. (see below)
Across the board, two stocks fell and two rose on Thursday:
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Applied Materials: rose by +1.41% ($2.26) to $164.19.
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Lam Research: fell by +0.17% ($0.14) to $84.19.
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Intel Inc: fell by -1.28% (-$0.26) to $19.99.
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GlobalFounderies: fell by -0.53% (-$0.20) to $37.51.
Thankfully, 3 of 4 stocks have recovered at the start of June 2025 due to positive market sentiments, except Intel Inc. Will the positive sentiments last ?
Countries Most Affected.
On a global scale, below are the Top 5 countries most affected by the latest tariffs announcement.
Freezing of Students’ Visa.
To add oil to fire, Trump administration has also ordered crackdown on international students—especially those from China and India.
Immediately, at least 270,000 student visa (issued to Chinese students) are at risk.
The latest crackdown also threatens talent pipeline for the US semiconductor industry.
With over 40% of US engineering PhDs held by foreign nationals, this policy shift could exacerbate the industry’s chronic talent shortages and slow innovation.
US Semiconductor Industry.
On Thursday, Nvidia - US bell weather for semiconductor and AI:
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Fell by -1.362% to end 05 Jun 2025 at $139.99 per share.
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Based on past 5 days’ performances, it was still up by +0.84% in June 2025.
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Nvidia’s positive earnings momentum helped to stay afloat.
The prospect of US semiconductor industry is neutral to weak, if Trump insists on pursuing self-sufficiency for this critical sector, while suppressing exports to China. (see below)
Adhering to the president’s executive order means less money earned for the impending quarter.
US semiconductor stocks remain a high-conviction AI play, but June 2025 brings heightened policy and supply chain risks.
Investors should favor (1) diversified, (2) domestically anchored players and (3) closely monitor macro and political developments.
For now, it maybe best to sit out and let the feud between the two most egotistical men cool down first as market will continue to be volatile, just like the tempers of these two “adults”. Ha, ha.
It’s a new month and new set of Economic reports/ data out to test US market sentiments all over again.
Don’t miss out my other picked post for Friday - see below ! Remember to Repost & share so that more will come to know ok. Thanks.
Must Read: Click on below titles to access. Repost to share, Like as encouragement ok. Thanks.
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Goldman says Sell AAPL and NVDA. For real ? My Friday, 06 June Picked post !
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Do you think US market will continue to pullback this week with the 25% steel tariffs enforced today, Wed, 04 Jun 2025 ?
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Do you think semiconductor stocks will continue to be hammered by the latest steel & aluminium tariff policy ?
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