Why Nvidia fell and then rose an hour later
Nvidia earnings came out Wednesday afternoon, after the market closed. The numbers were good. Sales were $96.2 billion, more than double what they were a year ago, and higher than what analysts had expected. Profit was higher than expected too. They told investors to expect $108 billion in sales next quarter, which was also more than analysts were looking for.
Good on every line. The stock immediately reacted after hours and went down about two percent. I was watching CNBC when all of the news was being reported.
One number caused the immediate reaction. Nvidia said that next quarter, out of every dollar of sales, 74 cents would be left after the cost of building the product (gross margin). This quarter it was 75 cents. One penny.
About an hour later, the executives got on a phone call with analysts. That call happens after every earnings release and it is where a company answers questions and talks about what it sees coming.
On the call, the chief financial officer said sales should grow about 70 percent next fiscal year. Analysts had been expecting something closer to 44 percent. She also said customers have already placed more than $2 trillion in orders waiting to be filled. This is referred to as backlog.
Then she said the part that mattered more. That 70 percent is already a good number but it is not what customers are asking for. It is what Nvidia can actually build. Customer forecasts point to demand roughly double that number. The company cannot make enough because of supply constraints.
Jensen Huang, the chief executive, said the same thing when an analyst asked him about it. Demand is well above 70 percent. Supply is limiting it to 70 percent.
There is a real difference between a company saying it expects to grow 70 percent and a company saying it could grow twice that if it had the product to do so.
The after-hours market immediately changed direction and jumped. It closed Thursday up 8.74 percent.
Nothing about the quarter changed in that hour. The same results were sitting there the whole time. What changed is that the company started talking about the future, and the future is what people are really buying. I walked through all of this in How to Read an Earnings Release, including the call and why it carries as much weight as the printed numbers. Nvidia just gave a very clear example of the lesson and I wanted to share it here.
One more piece of that report, and it connects to Intel two weeks ago. I wrote then that a company needing money has three ways to get it. Earn it, borrow it or sell a piece of itself. Intel sold new shares.
Nvidia borrowed. During the same three-month period they reported on, the company took on about $25 billion in new debt. Its long-term debt went from roughly $7 billion in January to $32 billion at the end of July.
Nvidia does not need money in any ordinary sense. The business brought in about $24 billion in cash during that same quarter. They borrowed anyway. In those same three months they handed about $26 billion back to shareholders, through buying their own stock and paying dividends. They also bought stock in other companies……and now have a portfolio of their own close to $95 billion.
So two companies, two weeks apart, went opposite directions. Intel sold new shares, which made every existing share a slightly smaller piece of the company. Nvidia bought shares back, which does the reverse.
Then Friday came and Nvidia fell 4.57 percent, which brings me to the second item.
The Fed chair talked, and that was enough
Every August the Federal Reserve holds a conference in Jackson Hole, Wyoming. On Friday, Kevin Warsh gave his first speech there as chairman.
He said inflation is still too high and the better numbers this summer do not convince him the underlying problem is improving. He came closer than he has before to saying interest rates may need to go up.
Warsh did not make any changes. He did not change a single rate. He talked, and the market gave back a piece of what it had gained on Thursday.
Two government bonds are worth looking at here, because they did not react the same way.
A Treasury bond is a loan you make to the federal government. The interest it pays you is called the yield. The two-year bond pays you back in two years. The 10-year pays you back in ten.
After the speech, the two-year yield went from 4.232 percent to 4.356 percent. The 10-year went from 4.672 percent to 4.724 percent. In plain terms the two-year moved more than twice as much as a percentage.
The reason is time. If you are holding a bond that pays back in two years, what the Fed does at its next few meetings is most of your story. If you are holding one that pays back in ten years, a single decision in September barely matters across that stretch.
This is worth knowing because mortgage rates follow the 10-year, not the Fed. So the Fed chairman spent Friday morning warning about higher rates, and the number that actually sets your mortgage moved a little instead of a lot. That said, the 10-year has moved a lot this year, beginning near only 4.20 percent.
One more thing about this week. Nvidia gave back a chunk on Friday and that is what people will remember. The market itself barely moved that day, and the week finished up. The Dow gained 0.53 percent, the S&P 500 gained 0.49 percent and the Nasdaq gained 0.85 percent.
One more thing, and it has nothing to do with money
This was my first full week with an empty house. My first week back at work since we dropped the kids off.
I have always been the first one in the office ever since leaving college. My most productive hours are before the world wakes up and starts to stir. This benefited me when I transitioned to my role as a home loan officer as I could monitor the market early in the morning and decide whether to lock rates for clients.
After leaving home loans, I did not need to keep those hours. I kept them anyway.
I kept them so I could leave in time to coach softball for Thalia or practice with her if she wanted. That was the reason I kept my schedule, 10 hours worked by 3 p.m., and I never had to say it out loud because she was there. Even when she stopped playing softball tied to injuries, I maintained my hours so I could be there.
Well, the kids are now gone. I maintain that same schedule. They are two and three hours ahead of me. I am up in case they need anything early in the morning.
It feels good to be available……to still feel like I am being a good Dad. That is the easier part. The hard part for me is leaving the office, because I know I am headed home to silence. Thalia and I would watch Atlanta Braves games and talk sports in general. She would always make me watch some really bad movie. I miss that.
I do not know yet what fills that space. I am not going to pretend I have figured it out in a week.
Blessings Come From the Worst of Times.
See you next Saturday.
Christopher
Weekly Notes — August 22, 2026