To Nvidia and Beyond: Sometimes Being Great Isn't Enough

When a popular stock doesn't shoot higher after a blowout quarter, the reasons are pretty easy to sniff out. A stock can be richly valued, and even a classic "beat and raise" performance doesn't justify the lofty forward multiples. Sometimes analysts get so far ahead of a company's guidance that exceeding its public expectations still falls short of where Wall Street pros were perched. There could also be subtle hints that storm clouds are looming in the distant future, beyond the near-term enthusiasm.

Nvidia (NASDAQ: NVDA) delivered spectacular results on Wednesday afternoon. It posted the kind of growth that you would never fathom from the wearer of the market cap crown. It didn't check off any of the three obvious scapegoats of market disconnect I singled out earlier. The initial market's reaction was unimpressed. The shares inched slightly lower in after-hours trading, recovering to a flattish performance come Thursday morning ahead of the market open.

Has investing in Nvidia become like living in Hogwarts School of Witchcraft and Wizardry? Are the artificial intelligence (AI) bellwether's perpetual feats of bar-raising magic so commonplace that they no longer titillate or stand out? There is still plenty to like amid the chorus of yawning. Let's dig into the joys of market apathy.

Image source: Getty Images.

Playing the long game

This is at least the fourth consecutive time that Nvidia shares have shrugged off a strong quarter and meandered or ticked lower. It doesn't matter, as long as you weren't day-trading the post-earnings reaction. Nvidia stock has easily beaten the market, gaining 66% over the past year. In short, Nvidia is a grower, not a shower, during earnings season.

As a relatively new Nvidia shareholder -- I followed the company for years, but finally bought into the stock two months ago -- I knew what I was getting myself into. It would take a lot to impress a jaded market after years of witchcraft and wizardry, especially at the quarterly earnings stage. No matter how great a report would be, the louder voices would be calling to cash out while you're ahead before the AI boom goes away.

The thing is that the revolution isn't going away. The torches and pitchforks will storm the castle every three months, but I'm up 25% as an investor over the past eight weeks. I like my math more than the knee-jerk earnings-day carnage.

Finding the path in the middle of apathy

Revenue rose 85% in the fiscal first quarter of 2027, ended April 26, accelerating from the 73% year-over-year jump it posted two months earlier. Adjusted earnings more than doubled, trouncing expectations on both ends of the income statement. This wasn't a fluke. The bottom-line beats are as consistent as the bottom initially falling out of the stock over the past year of quarterly updates.

The same bearish headlines will percolate this week. Can a company valued at what is now $5.4 trillion keep growing this fast? How long can a cyclical hardware company sustain these sky-high margins? Is the AI party finally over?

You've probably seen these same naysayers at play for some time, congratulating themselves when Nvidia ticks lower in the immediate aftermath of a gravity-defying report. Thankfully, for those who have owned Nvidia for years -- or even if you're a recent shareholder like me -- zooming out provides a prettier picture.

Let the marketplace yawn at the $80 billion stock buyback authorization or the 25-fold jump in its dividend. It's cool that folks are still calling Nvidia overvalued, even though it's trading for just 19 times next year's profit target. You also have to love the folks who assume this is peak Nvidia, when today's results continue to suffer from a trade war, resulting in no data center compute revenue from its largest market outside the United States. Did I mention that analyst estimates for fiscal 2028 are already almost 20% higher than they were three months ago? Did I mention that Nvidia still can't keep up with demand? Being on the right side of those trends can be a game changer. Let the boo birds boo. I'll just keep enjoying the magic show.

Rick Munarriz has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.