Nvidia earnings are all about guidance; Microsoft and Nvidia invest in Anthropic

Core Insights - Nvidia and Microsoft are set to invest up to $15 billion in Anthropic, highlighting the ongoing trend of partnerships in the AI sector [1][2] - The competitive landscape in AI is evolving, with Anthropic needing to secure capital to compete with players like OpenAI and Google [5][6] - Nvidia's upcoming earnings report is anticipated to show strong guidance, with projected revenues of around $62 billion for Q4 [7][9] Company Developments - Anthropic has been relatively quiet compared to OpenAI, but recent partnerships are aimed at enhancing their infrastructure capacity [3] - Nvidia's CEO mentioned a demand of $500 billion for AI products over the next two years, indicating significant growth potential [8][9] - Nvidia's business in China remains uncertain, with no revenue currently modeled from that market due to ongoing trade relations [10][11] Market Dynamics - The trend of "circular AI deals" raises concerns about a potential AI bubble, but the focus remains on creating valuable products for end customers [4] - Major investors like Peter Thiel and SoftBank have recently sold stakes in Nvidia, but this is not seen as a negative indicator for the company's demand outlook [12][13] - The competitive landscape has not shifted significantly, with Nvidia still being the preferred choice for hyperscalers despite emerging competition from Google [14][15] Valuation Perspective - Nvidia's valuation is characterized as healthy but not overly cheap, with a free cash flow yield of about 2.5% compared to 10-year yields at 4% [17][18] - The growth potential for Nvidia remains strong, with expectations of mid-teens growth in free cash flow for the foreseeable future [17]