Goldman's Top Tech Trader On Sentiment And Flows Across The Floor, And How Clients Reacted To Nvidia Earnings

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by Tyler Durden
Monday, Nov 27, 2023 - 07:25 PM

With just 24 trading days left on the year, Goldman's top tech trader Peter Callahan summarizes the current state of the year-end rally in 10 talking points. 

  1. Sentiment & Flows: the VIX closed at  new 3 year lows on Friday as the NDX grinded out its 4th straight weekly gain (best stretch since May) as the NDX looks to close out its best month of the year, already up +11% in the month of November (in fact, this would be the NDX’s second best month in 3 years). Against that backdrop, was notable to see GS PB data call out long sales / trimming across TMT last week ...

    ... and yet from my seat, sentiment on the sector remains solid – hard to argue with new 52wk highs last week from names like: CRWD, ADBE, CDNS, SNPS, MSFT, MELI, UBER GDDY, EXPE, Visa, AMZN, ANET to name a few – though, it is equally hard not to wonder (/ worry) about what’s next re; the encore as we look ahead to 2024 (time to broaden out your lens and expand breadth beyond the big 7 after each name is set to finish somewhere between up ~50% and up +225% on the year.. ?)
  2. NVDA: price action was somewhere between frustrating and disheartening for the bull camp last week as Nvidia’s multiple continued to compress (numbers revised up 15-20% post print vs. stock down ~4% = NVDA now trading at ~19.5x P/E on ’25). Best explanations for ‘weakness’ = 1) sentiment and positioning angst … “when stocks don’t go up on good news” .. esp 2 qtrs in a row) .. 2) lack of catalysts for NVDA (vs AMZN re:Invent this week + AMD / INTC .A.I. events in Dec) .. 3) ongoing debate about ‘as good as it gets’ or ‘peak’ (see Jan qtr revs guide ‘only’ +10% q/q vs guiding +18% q/q last qtr and just some human inertia about a stock up ~230% this year). While most of those explanations don’t hold much water for the bulls (understandably), in terms of the ongoing ‘what gets the multiple to expand’ debate that the market continues to wrestle with – I wouldn’t be surprised if the bull case for multiple expansion shifted towards the multiple being driven by Nvidia’s accelerated “platform” story with Nvidia expanding to being so much more than a GPU (and CUDA) company to be a full A.I. platform / AI foundry (GPUs, CPUs, Networking, Software, etc).
  3. E-commerce / Black Friday: quick rundown of stats rolling in re: Holiday Shopping (on balance, feels like relatively healthy, or better than feared, industry data, albeit always a bit difficult to compare apples-to-apples) … bloomberg summarizes the industry data, noting Black Friday shoppers spent a record $9.8 billion (+7.5% y/y) online in the US, led by electronics, smartwatches, TVs and audio equipment (per, Adobe Analytics) … whereas, pegs the figure at +9% y/y, driven by footwear, sporting goods, health and beauty …. at company specific levels Shopify (SHOP) said they saw a Black Friday record with a combined $4.1 bn in sales or +22% y/y (for context, SHOP’s 3Q reported GMV was +22% y/y) with hottest product categories: clothing, personal care, and jewelry. Follow real-time holiday shopping at Shopify-powered merchants around the world on SHOP’s platform here.
  4. CRM earnings (11/29): investor sentiment has cooled on CRM, as has stock performance, amidst ongoing debates about “what’s left” after the low hanging fruit on margins has been picked (or, at least, presumed to be have been picked) and if the company is able to deliver sustainable, double-digit organic topline growth. For 3Q, investors looking for inline/slight upside to the cRPO guidance of “slightly above +10% y/y cc” with most of the angst centered around F4Q guidance (2pt easier comp + some benefit of a price increase) and/or any early CY24 commentary.
  5. SNOW earnings (11/29): Snowflake is enjoying its best month since the Summer of 2022 (SNOW +18% in Nov) thanks to a handful of b-t-e consumption & cloud datapoints (namely DDOG, Azure and AWS better vs. CFLT and GCP worse), as well as whats being viewed as a reasonable bar into 4Q with street numbers at +26% y/y product revenues. Aside from key debates around competition and A.I. progress (/positioning), at this point and price (e.g. ~15x ’24 EV/S), investors will be keen to know if the last ‘cut’ is in – said another way, is the street at +30-31% y/y product revs in 2024 a beatable bar?
  6. WDAY earnings (11/28): sentiment/positioning quite a bit different from the last quarter – HF/tactical base has flipped more cautious on a view about slowing growth post analyst day (call it a 6 out of 10 positioning score) .. given the #1 debate on stock has been if the ‘reset’ to the medium term framework (FY27 targets - +17-19% revs growth and 25%+ OMs) was done out of conservatism (prudent reset) or out of necessity (growth will be re-basing to mid/high-teens), investors will focus on near-term growth trends (12 and 24- mo backlogs have both been growing >20% last several quarters) and any initial outlook for FY25 topline (with the ‘ref’ being +17-19% medium term targets)
  7. HF and MF quarterly positioning reports (based on 13-Fs): latest from GIR re: Hedge Fund Trend Monitor and Mutual Fundamentals notes both out last week. Highlights: Hedge Funds: Funds bought mega-cap tech during 3Q, lifting their exposures to the “Magnificent 7” to a new high as Hedge funds added heavily to Tech last quarter, with broad-based increases across industries .. Mutual Funds have struggled to keep up with benchmarks YTD as the outperformance of the largest tech stocks has continued to drag on mutual fund performance – e.g. the average large-cap fund is 647 bp underweight the "Magnificent 7" stocks (though, PMs increased their exposure to the group in 3Q). At a 'factor' level, Mutual Fund PMs rotated toward Quality, Growth, Tech and Energy in 3Q. 
  8. BABA: while investor sentiment and conviction in China ADRs remains mixed, at best (more attention being paid to PDD’s Temu and the rise of Chinese e-comm vendors in Western markets), I did think this recap from Ronald (GIR) answering key questions and debates on Alibaba post earnings was worthwhile – especially with the stock making new 1yr lows post earnings. Topics include: corporate structure, ROIC targets, shareholder return, investing for growth, GMV/CMR outlook, cloud/AI strategy, etc.
  9. Stat of the day (stat of the year).. from Tony P’s latest greatest hits note … a perennial show-stopper: going back to 1997, S&P has returned 509%.  if you remove S&P returns on FOMC day from your data set... and, you also remove the one day before FOMC day ... call that a total of 440 days out of 6,750 possible days ... the S&P would currently trade at the 2000 level ... aka 55% lower than current prices.
  10. Analog Semis / ADI .. the flip side of the ‘peak’ debate that NVDA is seeing is the ‘trough’ debate that Analog / MCU semis are seeing with some companies already well into a downturn (ADI, MCHP, TXN vs others seemingly        more resilient, for now: NXPI, IFX, etc). Despite another big guide down from ADI, the stock has started to trade better with the market starting to sniff out the 'bottom' of the cycle for ADI -- e.g. GIR models sequential increases in revenue starting in the July quarter of next year .. though, notes that predicting the depth and duration of a downturn has always been difficult and this cycle is no exception, particularly given how strong and long the preceding upturn was, as illustrated in the exhibit below.

More in the full note available to pro subscribers in the usual place.