Navigating the Market Sell-Off: My Take on Nvidia’s Stellar Earnings and 3 Stocks I’m Buying
The market is presenting us with a fascinating dichotomy. On one hand, we have Nvidia, a company posting financial results that seem to defy the laws of corporate physics. On the other, we have a broad market sell-off creating compelling entry points in other high-quality names. In this environment, my focus is on separating the signal from the noise, sticking to my circle of competence, and allocating capital to businesses I understand deeply.
Let’s dive into the spectacle that was Nvidia’s earnings and then explore the three stocks I’m actively accumulating as prices fall.
Nvidia: A Quarter for the History Books
To say Nvidia had a good quarter would be a monumental understatement. The numbers they reported were, in a word, staggering.
Record-Shattering Revenue and Growth
The headline figure was record revenue for the third quarter of $57 billion. This represents a 22% increase from the previous quarter and a breathtaking 62% surge from the same period a year ago. Let that sink in. A company generating over $50 billion in quarterly revenue is still growing at a rate most startups would envy. This isn’t just growth; it’s hyper-growth on a scale we’ve rarely, if ever, witnessed.
Jensen Huang, Nvidia’s CEO, didn’t mince words: “Blackwell sales are off the charts and cloud GPUs are sold out… Compute demand keeps accelerating and compounding across training and inference, each growing exponentially. We’ve entered the virtuous cycle of AI.”
The Engine: Data Center Dominance
The heart of this growth is the Data Center segment. Revenue here soared to $51.2 billion, up 66% year-over-year. Visually, the quarterly jump is even more dramatic, climbing from $41 billion last quarter. This marks the first time in Nvidia’s history that it added over $10 billion in revenue in a single quarter. The acceleration is not just continuing; it’s intensifying.
Profitability Keeping Pace
This isn’t a low-margin land grab. The profitability is equally impressive. Net income jumped 21% quarter-over-quarter and 65% year-over-year. Earnings per share grew 67% year-over-year, demonstrating that this top-line growth is flowing efficiently to the bottom line.
A Forward Look: Guidance and Vision
Looking ahead, Nvidia provided an outlook that somehow manages to be both astounding and a point of debate. They expect Q4 revenue to be approximately $65 billion, plus or minus 2%. If achieved, this would represent an 85% year-over-year growth rate, indicating continued acceleration on an annual basis.
However, on a sequential basis, it translates to about $8 billion in net revenue growth, which is a deceleration from the $10 billion added in Q3. This nuance is likely at the heart of the market’s mixed reaction. Is this the start of a normalization or simply a minor fluctuation in an unstoppable ascent?
During the earnings call, Jensen Huang offered a vision that extends far beyond the next quarter. He stated, “We are still in the early innings of these transitions that will impact our work across every industry.” He provided a staggering data point: Nvidia has visibility into “$500 billion in Blackwell and Rubin revenue from the start of this year through the end of calendar year 2026.”
He further positioned Nvidia as the “superior choice for the $3 trillion to $4 trillion in annual AI infrastructure build” he anticipates by the end of the decade. To underscore current demand, he noted that cloud providers are “sold out” and Nvidia’s GPU installed base is “fully utilized.” He even cited Meta, noting that AI recommendation systems are leading to “higher quality and more relevant content, leading to more time spent on apps.” This feels like a direct rebuttal to the growing narrative that massive hyperscaler capital expenditure (capex) isn’t yielding returns.
Addressing the Naysayers: A Look at the Viral Criticisms
When a company is this dominant, it inevitably attracts skeptics. In the wake of the earnings report, several critiques went viral on social media. As someone who values data over dogma, I believe it’s crucial to examine these claims.
The “Manufactured Beat” Narrative
One viral post argued that Nvidia’s revenue beat was “manufactured” because accounts receivables grew by $5.58 billion. The claim was that without this, revenue would have missed estimates.
This is a fundamental misunderstanding of accounting. Accounts receivable represents revenue that has been earned and committed by customers but for which cash has not yet been received. It is recognized revenue under standard accounting principles (GAAP). This is not a red flag; it’s a normal part of business, especially for a company shipping vast quantities of high-value products. An increase in receivables often signals strong future cash collections, not accounting manipulation.
The “Cash Flow Disconnect” Argument
Another popular critique pointed out that while revenue grew 22% quarter-over-quarter, operating cash flow declined by 13%. The argument was that if demand were truly “insane,” cash flows would be too.
A deeper look at the cash flow statement tells a different story. The decline was primarily driven by two factors: a $5.58 billion increase in accounts receivable (as discussed) and a $4.8 billion increase in inventories.
- Rising Accounts Receivable: As established, this indicates customers have committed to more purchases.
- Rising Inventories: A company aggressively building inventory is typically preparing for anticipated high demand. It signals confidence in future sales, not weakness.
In fact, these items on the cash flow statement are often signs of a business in a high-growth phase, investing in its working capital to fuel future sales. To interpret this as a sign of weak demand is to misinterpret the financial statements.
The Two Lingering Questions: The Stock Price and My Portfolio
This brings us to the two most obvious questions: Why did the stock fall after such a blowout report, and why don’t I own it?
Why the Stock Dipped
Despite the phenomenal results, Nvidia’s valuation remains rich. The stock trades at approximately 24 times sales and 57.5 times free cash flow. At these multiples, the company is priced for perfection and years of continued hyper-growth. Any hint of a sequential deceleration in growth, as seen in the guidance, can be enough to give investors pause and trigger profit-taking. The market is asking, “What happens when the music slows?”
Why Nvidia Isn’t in My Portfolio
This is the most common question I receive. My reason is straightforward: it comes down to price, long-term visibility, and my circle of competence.
- Valuation: The current price bakes in an enormous amount of future success. Any stumble could lead to a significant de-rating of the stock.
- Customer Concentration: Over 60% of Nvidia’s revenue comes from just four customers: likely Microsoft, Google, Meta, and Amazon. This creates substantial concentration risk.
- The Hyperscaler Threat: These very customers are actively working to reduce their reliance on Nvidia. Google is already training its flagship Gemini model on its own TPUs. Amazon is developing its own Inferentia and Trainium chips. When you’re spending hundreds of billions on capex, developing in-house alternatives to shave off even 10% of costs becomes a monumental priority. I cannot confidently predict what Nvidia’s relationship with these titans will look like in five years.
I have tremendous respect for Nvidia and admit I’ve missed its incredible run. However, my investment philosophy is built on staying within my circle of competence and investing in businesses where I have a high degree of certainty about their long-term prospects. For me, Nvidia’s future, while dazzling, involves too many variables I cannot confidently assess. I believe you can build tremendous wealth by investing in wonderful businesses you understand deeply, without needing to own every market darling.
Three Stocks I’m Buying in the Current Sell-Off
While the market is obsessed with Nvidia, I’m finding compelling value elsewhere. As prices fall, I’m steadily adding to my positions in high-quality companies whose long-term stories remain intact. Here are three I’m actively buying.
1. MercadoLibre: The Latin American Juggernaut
MercadoLibre is a stock I’ve owned for over a year, and I’ve been consistently buying as it has fallen into a near-30% correction. The disconnect between its price and its fundamental performance is, in my view, stark.
The Business Firepower
This is not just an e-commerce company; it’s a fintech and advertising behemoth dominating Latin America. Its most recent quarter saw 39% year-over-year revenue growth on a base of over $20 billion in annual revenue. This is exceptional execution.
Recent news from the ground reinforces the story. The manager of MercadoLibre Mexico recently posted about their record-breaking sales day, with over “3,000 purchases per minute.” The company’s vans are ubiquitous in many regions, and firsthand accounts suggest it is out-competing even Amazon in key markets like Mexico.
The Flywheel in Action
A key reason for the recent sell-off was the company’s decision to lower free shipping hurdles in Brazil. Analysts fretted over the short-term margin impact, but this is a classic, strategic move. By leveraging its immense economies of scale in logistics, it can offer a better value proposition (faster, cheaper shipping) that competitors cannot match. This attracts more buyers, which in turn attracts more sellers to the platform, strengthening the entire ecosystem. It’s the Costco playbook applied to Latin American e-commerce.
A Fintech Powerhouse in Its Own Right
The fintech segment, Mercado Pago, is now generating $11.3 billion in trailing twelve-month revenue. To put that in perspective, Nubank, a pure-play digital bank valued at $76 billion, has revenue of about $14 billion. MercadoLibre’s fintech arm is almost as large as Nubank’s entire operation, yet it sits inside a company that also has a dominant e-commerce platform, a growing advertising business, and a credit arm—all for a total market cap of just $96 billion. The value proposition here is compelling.
2. Brookfield Corporation: The Infrastructure Titan
Brookfield Corporation is the largest position in my portfolio, and I manage it to stay around a 25% allocation. I am continuously topping it up because I believe it is a perpetual value compounder.
Positioning for the AI Infrastructure Boom
A major recent development is Brookfield’s launch of a $100 billion global AI infrastructure platform, anchored by a fund with strategic partners like Nvidia and the Kuwait Investment Authority. This is a masterstroke.
As Jensen Huang himself said in the partnership announcement, “AI infrastructure demands land, power, and purpose-built supercomputers. Our partnership with Brookfield brings all of these elements together.” Brookfield isn’t betting on which AI model will win; it’s selling the picks and shovels—the essential, mission-critical physical infrastructure. This creates long-term, contracted, and inflation-protected revenue streams. Bruce Flatt, Brookfield’s CEO, believes this segment could become the company’s largest profit generator over the long term.
A Torrent of Future Cash Flow
During their recent investor day, Brookfield projected they will generate a staggering $53 billion in free cash flow over the next five years. They expect distributable earnings per share to compound by 25% annually over that period.
Even if I build a discounted cash flow model with conservative assumptions—22% annual earnings growth, a slight multiple compression to 17x earnings—the model still suggests a fair value roughly 56% above the current share price, implying a potential 20% annual return. For a company of this quality and diversification, that is an opportunity I am happy to keep buying.
3. Meta Platforms: A New Addition on Weakness
I previously owned Meta, selling for a solid profit on the way up from its 2022 lows. In hindsight, I believe that was a mistake. The recent sell-off after its own stellar earnings has provided a chance to re-enter, and I have initiated a new position.
Accelerating Growth Amidst Capex Fears
Meta’s Q3 revenue grew 26% year-over-year, the fastest rate among the hyperscalers. Its trailing twelve-month operating cash flow is a robust $108 billion. Yet, the stock sold off aggressively. Why? The market is terrified of its massive increase in capital expenditure guidance, all funneling into AI.
Zuckerberg’s Long-Term Conviction
The conference call, however, provided crucial context. Mark Zuckerberg explained that the company is constantly “capacity constrained.” He stated, “We keep on seeing this pattern where we build some amount of infrastructure to what we think is an aggressive assumption and then we keep on having more demand.”
His rationale is simple: the proven return on AI investment in their core business—driving ad conversion rates and user engagement—is so high that it’s more costly to be constrained than to potentially overbuild. He views any potential overspending as simply “pre-building for a couple of years,” a minor cost compared to the opportunity cost of missing out.
This is backed by data. Meta is gaining market share in the U.S. digital advertising space. Advertisers are voting with their wallets, indicating they are achieving a superior return on ad spend on Meta’s platforms, fueled by its AI advancements.
A Compelling Valuation
Despite this, the stock now trades at a price-to-operating-cash-flow multiple of 13.8, well below its historical average of around 18. Running a conservative DCF model—assuming 12% annual cash flow growth, a 2% buyback yield, and a terminal multiple of 15—still suggests the potential for high-teens annual returns. For a business of this quality, with a clear path to monetizing its investments, the risk-reward at these levels is attractive.
Final Thoughts
The current market volatility is a test of conviction. It’s easy to get swept up in the fear or to chase yesterday’s winners. My strategy remains focused on fundamentals. Nvidia is an extraordinary company, but its valuation and my uncertainty about its long-term customer dynamics keep me on the sidelines. Instead, I’m putting capital to work in businesses like MercadoLibre, Brookfield, and Meta, where I have high conviction in their long-term growth stories and believe the current prices offer a margin of safety. In the world of investing, sometimes the best action is to look away from the spotlight and focus on the solid ground beneath your feet.
