Grass is always greener

**SPEAKER_1** (0:00)
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**Kristin Schwab** (0:31)
On the show today, we've got earnings, we've got inventories, and hey, what team are you on? Team AstroTurf or team Real Grass? From American Public Media, this is Marketplace.
In New York, I'm Kristin Schwab in for Kyra's Doll. It's Thursday, August 27th, and it's good to be here with you.
If you're a regular listener of ours, you might notice that we tend to avoid spending a ton of time on air talking about any one company in the AI race. It all feels kind of early, uncertain, and intangible, and there have just been so many deals happening between firms, many of them circular, which we have talked about on the show. Well, today, we are going to take a few minutes to talk Nvidia, because for the first time ever, the AI chip maker has offered a long-term growth forecast, something pretty rare in the quarterly earnings cycle. In its Q2 call yesterday, Nvidia said it's expecting revenue to grow by 70 percent next year. No, you don't need to clean your ears out. Yes, I said seven zero. Compare that to the 44 percent growth analysts expected, and you got to wonder, how accurate is any company's forecast, especially one that's eager to prove itself? Marketplace's Samantha Fields has more.

**Samantha Fields** (1:59)
Companies don't have to issue long-term guidance, but Philip Stocken at Dartmouth's Tuck School of Business says it's valuable when they do.

**Philip Stocken** (2:07)
It's vital to investors, to analysts, to you and I as retail investors to understand what Nvidia are doing.

**Samantha Fields** (2:14)
Knowing what companies expect can help investors decide whether and how much to invest. Though Stocken says it is important to take their projections with a grain of salt.

**Philip Stocken** (2:24)
There is evidence that forecasts tend to be slightly upwardly biased. Not much, but they are biased because they believe that forecast is attainable.

**Samantha Fields** (2:32)
But typically, Todd Cravid at the University of Connecticut says forecasts are in the ballpark.

**Todd Cravid** (2:37)
Revenue is a pretty straightforward number. It's easy to interpret and it's easier to forecast. And so that's why I would expect it to be pretty reliable.

**Samantha Fields** (2:45)
If a company's forecast is not reliable, Amy Hutton at Boston College says there can be big consequences.

**Amy Hutton** (2:52)
If you make a statement like we expect 70 percent growth and you don't achieve 70 percent growth and you don't, along the way, update investors about why you're not going to achieve it, you could get sued.

**Samantha Fields** (3:07)
Your stock can also take a hit if you drum up high expectations and don't meet them, which is why Hutton says it's actually common for companies to under promise.

**Amy Hutton** (3:16)
They will spend time throughout the year walking down analysts' expectations. So, when they get to that final year end announcement, they beat the expectations and get a bump in their stock price.

**Samantha Fields** (3:30)
I'm Samantha Fields for Marketplace.

**Kristin Schwab** (3:33)
We got a peek at some Census Bureau data this morning on how much stuff businesses have sitting on their shelves or in the back of their stores or at warehouses. That data is officially called inventories. And for months, inventory growth had been slowing down. Two-tenths of a percent here, three-tenths of a percent there, until a sharp turn in July when inventories surged 1.3%.
Marketplace's Sabri Beneshor has more on the great summer shelf stocking and what it tells us about the economy.

**Sabri Benishur** (4:06)
Storing stuff on shelves and in warehouses costs money and time and businesses don't like to do it if they don't have to. Plus, what if nobody buys your extra stuff, then what? For the past year or so, businesses have been especially skittish about it and have not been stocking their shelves very deep at all.

**Michael Pearce** (4:24)
I think a lot of that has been driven by a lot of the policy uncertainty over the last 18 months.

**Sabri Benishur** (4:30)
Michael Pearce is chief US economist at Oxford Economics. Tariffs, war, new tariffs, new war, makes for kinda twitchy business planning, but it may be that businesses are now deciding, you know what, it's been long enough, let's do it, let's buy more stuff.