Nvidia crushes earnings – again… no sign of an AI slowdown… jobs data surprises to the upside… the Technochasm widens… navigating a slowing economy and overvalued tech plays… Eric Fry is finding the right balance in health care…
Just after this morning’s opening bell, the market breathed a sigh of relief.
Last night, Nvidia Corp. (NVDA) delivered the earnings report that Wall Street desperately wanted – crushing expectations and, at least for a moment, silencing doubts about the AI boom.
Since late October, the tech/AI trade has been wobbling. The narrative driving sky-high valuations looked shaky as questions mounted about whether the AI boom was overheating.
Investors were asking: Has the trade peaked, or will it snap back?
Last night, with its earnings report, Nvidia confirmed that the AI infrastructure boom is very real with an earnings report that legendary investor Louis Navellier called “perfect.”
The company didn’t just clear modest expectations…it blasted past them
Both revenue and earnings beat forecasts. As importantly, management painted a rosy picture of the future.
This was key. Wall Street wanted reassurance that the gravy train would continue.
Here’s The Wall Street Journal:
The company increased its guidance for the current quarter, estimating that sales will reach $65 billion—analysts had predicted revenue of $62.1 billion for the quarter.
Also important, the data-center segment (the engine of this AI infrastructure bet) generated roughly $51.2 billion, signaling that the compute backbone of the AI build-out remains in full throttle.
But it wasn’t just the numbers that came in strong – it was the commentary
Here’s CEO Jensen Huang:
There’s been a lot of talk about an AI bubble. From our vantage point, we see something very different.
Huang went on to say that “cloud GPUs are sold out,” and sales for Nvidia’s Blackwell chip are “off the charts.” But here was the doozy:
We’ve entered the virtuous cycle of AI.
AI is going everywhere, doing everything, all at once.
And it didn’t stop there. Tech bulls were thrown another bone – robotics.
Management highlighted robotics as a key growth area, with Q3 automotive and robotics sales increasing 32% annualized.
This aligns with what our tech expert Luke Lango, editor of Innovation Investor, has been tracking – the coming wave of humanoid robotics that will transform manufacturing, healthcare, and beyond. We’ll have more on this from Luke in an upcoming Digest.
But while Nvidia’s strong earnings goosed the stock market just after the opening bell, that wasn’t the end of the story
As of mid-morning, it appeared today would be a big “up” day on Wall Street, led by NVDA, up about 5%. But as the session is progressing, that gain has turned to a loss of nearly 1%.
Meanwhile, the broader market has followed suit: early strength in the S&P, Dow, and Nasdaq has fully reversed, with all three indexes turning negative.
This flip reflects a deeper tension beneath the surface.
Even with Nvidia’s blowout results, today’s reversal shows that Wall Street still isn’t fully convinced about the near-term payoff of the AI boom. Investors may love the long-term story – but the market is signaling that the path from here may be bumpier than Nvidia’s “perfect” quarter suggests.
But this isn’t the only news impacting Wall Street today…
The latest jobs data breathes new life into a December rate cut
This morning, after weeks of silence during the federal government shutdown, the Bureau of Labor Statistics released its September jobs data, which had many investors on edge.
Would we find a crumbling labor market? How bad would it be?
In an unexpected twist, the U.S. economy added substantially greater jobs than forecasted.
Here’s CNBC with the details:
Nonfarm payrolls increased by 119,000 in the month, up from the 4,000 jobs lost in August following a downward revision. The Dow Jones consensus estimate for September was 50,000.
While this reflects a reasonably healthy labor market – certainly one not on the brink of recession – the unemployment rate crept higher to 4.4%. That’s its highest reading since October 2021. Plus, most of the job gains came from healthcare and restaurants, not widespread hiring.
So, how might this affect the Fed’s interest rate decision next month?
The stronger-than-expected growth shows that the labor market isn’t on the edge of a cliff as has been feared. And while some would argue that this means the Fed will take a breather on rate cuts in December, some on Wall Street see it differently…
Rather than focusing on that 119,000 gain, traders are zeroing in on that higher 4.4% unemployment rate and interpreting it as “more reason to cut.” Plus, if we average job gains over the last four months, the figure clocks in at about 44,000 – not exactly robust.
So, some on Wall Street are growing more optimistic about another cut. We can see this by looking at the CME Group’s FedWatch Tool. This shows us the probability that traders are assigning to different fed funds target rates in the future.
Yesterday, traders put roughly 30% chance on a December rate cut; that number has risen to 42% today in the wake of the new jobs print. Still, this leaves nearly 60% of traders banking on a pause.
Circling back to Louis, here’s his quick take from this morning’s Growth Investor Flash Alert:
Let’s hope the Fed does the right thing – cuts rates on December 10 – but if not, they’ll be cutting rates in the next year. They have to.
Returning to Nvidia and the AI boom, if zoom out, a darker story emerges
Nvidia’s earnings victory isn’t just a win for shareholders. It’s another data point in a story we’ve been tracking closely in the Digest – the wealth divide powered by tech and now accelerated by AI.
Our macro investing expert Eric Fry, editor of Fry’s Investment Report, has been at the forefront of this story for years, helping his readers profit. The latest example is the 110% return that Fry’s Investment Report booked on tech chip darling Advanced Micro Devices Inc. (AMD) last month.
Longtime Digest readers will recall Eric’s term, the “Technochasm” which describes the wide – and expanding – wealth gap in the United States that, in large part, is being driven by technology.
Increasingly, a small group of technology business owners, key employees, and investors are on the receiving end of AI’s wealth creation.
To illustrate, let’s circle back to Nvidia.
Here’s The Kobeissi Letter from August:
This is incredible: Roughly 50% of Nvidia employees are now worth over $25 million.
Roughly 80% of Nvidia employees are now millionaires.
The AI revolution is producing unprecedented wealth.
Unprecedented wealth…for some.
Thanks to AI, wealth concentration is now accelerating and exploding the gap between the “haves” and “have-nots” to the greatest level of our modern age.
While Nvidia employees are considering their color options for their next Ferrari, nearly 42 million Americans – about 12% of our population – are on the Supplemental Nutrition Assistance Program (SNAP), the food stamp program.
For the latest on this from Eric, let’s go to his November issue of Investment Report from earlier this week:
The AI investment boom is another force that’s powering the growing divide between rich and poor.
These massive investments will generate a lot of economic stimulus, but it will accrue narrowly to capital owners, not to bartenders and baristas. The GDP may look okay, but the paycheck distribution doesn’t.
America isn’t collapsing; it’s diverging.
Given this divergence, Eric argues that investors should be thinking carefully about their exposure right now
We’re increasingly entering a “balance beam” market.
Lean too far to one side and you’re exposed to companies hemorrhaging sales as stretched consumers on the wrong side of the Technochasm pull back.
Here’s Eric’s related investment takeaway:
The cautious investor might want to lighten up on the companies with heavy exposure to stretched households.
That group would include industries like mass-market restaurants, discretionary retail, subprime credit, and auto finance.
But lean too far the other way, and you’ll find yourself exposed to stocks that – though high-flying – are increasingly risky due to excessive valuations (today’s market reversal illustrates such risk).
Back to Eric:
Trimming positions in high-flying AI stocks might also be a prudent course of action.
Because many of these stocks are “priced for perfection,” even small doses of bad news can cause outsized selloffs.
So, how do we stay squarely on the balance beam and move forward today?
One option?
Health care.
Here’s Eric with why:
Valuations across the healthcare sector have tumbled to record lows relative to the S&P 500.
You’d have to go back more than 30 years to find valuations this depressed.
As one example of a great company selling at a bargain price, Eric highlights Pfizer Inc. (PFE). It’s trading at a historic discount to the S&P:
Investors are now paying about 70% less for a dollar of Pfizer earnings than for a dollar of earnings from the S&P 500 as a whole.
This is the largest discount since 1993 – right before the start of a powerful bull market for healthcare stocks.
Over the next six years, PFE soared more than 1,000% over the S&P 500 index.
Want another idea?
Eric points toward Bristol-Myers Squibb Co. (BMY), one of the world’s largest pharmaceutical companies.
Back to Eric for a few numbers:
The company raised its midpoint revenue guidance for the year from $46 billion to $47.75 billion and bumped its earnings-per-share guidance to $6.50. Free cash flow is rising sharply, and net debt continues to decline.
Bristol-Myers trades for about seven times forward earnings – one-third of the S&P’s multiple – and yields more than 5%, backed by strong free cash flow and an A-rated balance sheet.
Those numbers suggest a tired, no-growth company, yet its business is clearly regaining momentum.
Eric has recommended two other drug stocks in Fry’s Investment Report – both up nearly 50% in 2025, roughly tripling the S&P’s 13% gain.
If you’re interested in knowing which ones, Eric breaks down his complete healthcare strategy – including these two winning positions – in his latest issue. Click here to learn how to join Fry’s Investment Report and see his full analysis.
Overall, AI is accelerating the wealth divide, leaving some companies flush with capital – yet perhaps with dangerously lofty valuations – while others struggle under the weight of shrinking consumer budgets.
Health care offers a middle path – participating in the same powerful forces reshaping the economy, but at valuations that suggest plenty of room to run.
Here’s Eric’s bottom line:
Pharma’s cash flows are on the rise, gross margins are still roughly double the S&P’s, and the sector is beginning to integrate AI in ways that could make drug development faster, cheaper, and more precise.
As an added plus, the sector offers a healthy 3% dividend yield – more than double the S&P 500’s.
We’ll keep you updated on all these stories here in the Digest.
Have a good evening,
Jeff Remsburg
