Bearish Things Are Happening
$QQQ $NVDA $HIMS $CAVA
During this morning's Investing or Gambling podcast, hosts Illiana Mike and George from South Florida both agreed they’re starting to see cracks in the economy, with signs that the U.S. consumer may be losing steam. Credit card delinquencies continue to rise*, and after a strong Q4 spending period, inflation could finally be taking its toll.
For much of this extended bull market, a common theme has been that the economy is not the stock market. Right now, one could argue the market is being driven more by NVIDIA's Blackwell supply constraints than by consumer credit conditions. Without getting into the obvious reasons why that’s been the case, it has been for quite some time—until it isn’t. If the U.S. consumer is truly slowing down in a meaningful way, it could eventually trickle into major indexes. But historically, investing around economic data has been a losing game, whether it’s the Dow Jones, S&P 500, or Nasdaq 100.
That said, we’ve had a series of events over the last few days that likely triggered profit-taking and broader selling across stocks and indexes:
Walmart Earnings & High-Income Consumer Trends – Walmart reported strong earnings, but we could be seeing a shift in consumer behavior. Higher-income households are increasingly shopping at Walmart, indicating that economic pressures may be extending beyond lower-income demographics. Walmart also guided lower for Q1, sending its stock down—a notable event given its heavy weighting in major indexes.
Hypergrowth Momentum Stocks Sold Off – High-multiple, high-growth stocks saw sharp declines as market sentiment shifted away from riskier assets.
UnitedHealth Group (UNH) Dragged Down the Dow – UNH, a major Dow component, sold off, weighing heavily on indexes. This was primarily due to reports of a DOJ civil fraud investigation into its Medicare Advantage billing practices.
Potential Nvidia Blackwell Delays – NVIDIA’s next-gen Blackwell AI chips face potential supply constraints, adding to broader tech sector weakness. Beth Kindig of I/O Fund, a well-known Nvidia bull, sees a “potential” short-term slowdown in data center revenue’s. Her article was published over the weekend and concluded that the I/O Fund has reduced its Nvidia position to 10% of its overall portfolio holdings.*
Satya Nadella Tempers AI Expectations – Microsoft’s CEO cautioned against over-exuberance on AI during last week’s Dwarkesh Podcast, potentially cooling sentiment around AI-driven market rallies.
All of these factors combined have fueled recent market weakness. The question now is whether this is just a healthy pull-back—or the start of something more concerning.
The Pendulum Swing of AI Expectations: Microsoft, Nvidia, and What It Means for Investors
It seems like we’re in the pendulum swing between markets getting overly excited about AI and then tempering expectations—something Microsoft CEO Satya Nadella hinted at in his recent interview on the Dwarkesh Podcast last week* (see refences). If you look at tech stocks, the market action reflects this constant tug-of-war between AI optimism and the reality check that this revolution won’t happen overnight.
Could it be argued that every major technological shift (the internet, cloud computing, mobile-digital adoptions) went through phases of extreme bullishness followed by skepticism? If we zoom out, will we say the same about the AI revolution?
The good news is that even if the reality of AI’s industrial revolution lands somewhere in the middle—between extreme hype and tempered expectations—it’s still a net positive. I don’t disagree with Nadella that GDP growth worldwide is going to be a struggle going forward in the next few years. Let’s say global GDP is around 3.2% today, is it realistic we’ll see a sustained 10% global GDP in the next decade due to just the evolution of AI chatbots and coding assistants? Of course, if the transformation to physical robotics in manufacturing and at the consumer level is on the horizon, this could be a step to increased output efficiency.
AI would have to be cheap, accessible and break regulatory hurdles quickly. The AI ecosystem would have to evolve beyond GPU’s, and must be widely adopted across emerging markets, not just Silicon Valley or large enterprises. This type of GDP growth requires an entire restructuring of the economy, and entirely new industries that don’t yet exist.
My point is we have to expect volatility as long-term investors that have exposure to the AI story.
Big Week of Earnings 2/24/25:
This is a big week for earnings and what I’d consider the grand finale of Q4 earnings, although most companies have already reported. This week, a few key stocks I own are set to report, and each of them has significant catalysts that could impact their share prices in the short term.
Hims & Hers Health, Inc. (HIMS)
📅 Earnings Release Date: Monday, February 24, 2025 (After Market Close)
This is arguably the most high-stakes earnings report for momentum stocks of the week due to the recent FDA announcement regarding weight-loss drug shortages being resolved. Last week, the FDA confirmed that Novo Nordisk’s Wegovy and Ozempic are now fully available, which means that compounding pharmacies, including Hims & Hers, will no longer be able to offer compounded versions of these drugs (allowing a distribution wind-down period of April/May). Patients will need to transition back to the FDA approved versions provided by original manufacturers.*
This is the main reason why HIMS stock sold off sharply last week. Traders will be listening closely to management’s response to this shift, specifically:
What percentage of revenue was derived from compounded weight-loss drugs?
Pipeline Updates: Will they focus on partnerships with branded GLP-1s or introduce other metabolic health products? Any additional healthcare services in the pipeline?
Subscriber Growth Metrics – What should we expect after losing compounded GLP-1s with regards to projected subscription growth for 2025?
Guidance for 2025 – Does management revise revenue projections downward or remain bullish?
CAVA Group (CAVA)
📅 Earnings Release Date: Tuesday, February 25, 2025 (After Market Close)
For CAVA, my focus is less about surprises and more about execution. The key drivers remain the same:
Same-store sales growth – Is foot traffic strong? How are repeat customers trending?
Operational efficiency – Are margins improving, or is inflation cutting into profits?
Expansion plans – Any new store openings announced? Are they hitting their growth targets?
This stock is priced for growth, so if there’s any slowdown in sales or expansion, the market could react negatively. However, if they continue executing well, it reinforces why CAVA has been one of the best-performing restaurant stocks.
NVIDIA Corporation (NVDA)
📅 Earnings Release Date: Wednesday, February 26, 2025 (After Market Close)
The most important earnings call of the quarter for AI stocks and the broader market. Investors will be laser-focused on:
Blackwell chip supply constraints – Are delays materializing, or is demand still outpacing supply?
Data Center Revenue Projections for 2025 – AI demand is strong, but is it growing as fast as expected?
Any signs of margin compression? – With competitors ramping up AI chip production, does Nvidia have to adjust pricing?
The real risk isn’t just a revenue miss—it’s a slowdown in forward guidance. If Nvidia signals that growth in AI demand is moderating or that Blackwell delays are worse than expected, the stock will take a hit.
Conclusion: The Sentiment is Bearish, But the Long-Term Thesis is Always Bullish
Just to clarify—the title says “Bearish Things Are Happening,” but that doesn’t mean I’m personally bearish. Nor am I blindly bullish. I’m simply reporting what I see: Sentiment right now feels bearish.
And notice I’m not focusing on the U.S. consumer, macro conditions, or geopolitical risks. My focus is strictly on Q4 earnings results and 2025 earnings guidance. The stock market is not the economy (for the most part). Sure, there are pockets of weakness and sectors facing challenges.
That being said, my long-term stance remains unchanged:
I’m always long-term bullish on U.S. stocks, tech stocks, and the Nasdaq-100.
Short-term price swings are unpredictable, but long-term wealth creation is possible.
Whether you invest passively or buy below intrinsic value, the compounding effect over time is powerful.
So while market sentiment may shift week to week, the core investing principles don’t change.
Thank you for reading, and please subscribe for more insights on long-term investing.
P.S. As soon as the latest Investing or Gambling Podcast is posted, I will list in the references below. I also do not email subscribers back to back days, but it’s the weekend, and I hope you don’t mind as I wanted to get things off my chest.
References:
I just discovered
— looks like I was missing out. I suggest following his substack page.
https://www.investors.com/news/technology/hims-stock-fda-wegovy-weight-loss-drugs-shortage/
https://www.earningswhispers.com/
Disclaimer: This blog is for informational purposes only and does not constitute financial advice. All opinions are my own, and I am not a financial advisor. The information provided reflects my personal views and is intended to encourage discussion and thought among readers. Investments involve risk, including the loss of principal, and past performance is not indicative of future results. Always conduct your own research or consult with a qualified professional before making any financial decisions.