NIO's Business vs. NIO's Stock, And Nvidia's CEO Is Out

Obi (0:00)

NIO's most expensive SUV just sold 10,000 units in 49 days. And today, NIO stock closed three cents above its lowest price of the past year.

One of those two things is wrong. Also today, the CEO of Nvidia is out effective immediately.

Elon Musk found a new way around a data center ban in Texas, and home sales just hit a 16 year low. Let's figure out who's right. I'm Obi, this is Courtside Financial.

We start with NIO because the business and the stock are telling two completely different stories. Let's go. Here's the stock. NIO closed today at $3.13, down about 3.5% on no company news at all. The 52 week low is $3.10. The stock is down about 36% this year and about 26% in just the last three months. Now, here's the business. The ES9, the flagship reportedly passed 40,000 deliveries in under six months and the latest 10,000 took 49 days. Last quarter vehicle margin was 18.5% up from about 10% a year earlier.

NIO posted a small adjusted profit and it had about $56.7 billion rent and cash and investments. So who's wrong? Well, let me give you guys the bare case honestly, because it's real. October deliveries fell 15% from last year.

Onvo, the family brand, was down about 52%.

Material costs per car, they're going up. And on the official accounting, NIO still lost money last quarter. Here's my read. The stock is pricing the Onvo problem and ignoring the ES9. The market sees one brand shrinking and assumes the whole company is. But the expensive cars, the high margin cars, are the ones that are actually selling. Reportedly, Wall Street's average price target is around $6.

That's nearly double where it closed today. I'm not telling you it's a buy. I'm telling you there's a date that settles this argument. December 1st, November deliveries. NIO needs about $42,900 a month to hit its fourth quarter target. If it gets close, the stock is wrong. If it misses badly, the stock was right. Three weeks, you guys mark it. Now a story from the Chinese internet that explains why NIO's premium cars have some room to run. Three years ago, Volkswagen paid 700 million for a piece of XPeng. The idea put XPeng's tech inside Volkswagen's cars and win China back. So how's that going? XPeng is flying over 50,000 deliveries last month. It's first time ever above that mark. Volkswagen, its China sales fell 30% in the first three quarters of the year. Its electric car sales fell 42%.

And the first car that was built on XPeng's tech, the plan was 36,000 a month. Reportedly, it averaged 267 after two price cuts. Here's the part I love. XPeng wins either way. It reportedly collected about 5 billion ren in tech fees from Volkswagen last year at around 80% margins. The cars flop and XPeng still gets paid. And Volkswagen's one real hit in China, a model with 38,000 orders, it dropped XPeng's driving system and went with a rival. So what does this mean for NIO? Well, two things. First, the old premium brands are losing in China. Those buyers are going somewhere and the ES8 and ES9 are sitting right in that price range. Second, NIO has its own version of the XPeng play.

Geely is taking 30% of NIO's battery swap business. That's a partner paying for what NIO built. In China right now, the money isn't only in selling cars, it's in using the technology underneath them as part of the business plan. Okay, the biggest story in American business today, we have to talk about it. Something I've been trying not to speak on, but we got to talk about it. Jensen Huang has resigned as the CEO of Nvidia. This is confirmed by the company. He's out. He's gone. He's no longer the CEO, president and board member. Effective immediately.

The chief financial officer, Collette Cress, takes over as the interim CEO. The board named its first ever chairman, and the company's statement gave no reason. No statement from Huang Yi. You guys know the backdrop, especially if you've been watching this channel or watching the news this week. He admitted that he was unfaithful to his wife. The board opened an independent investigation. The allegation that the woman involved was gathering information for China is still just an allegation at this point.

An allegation, guys, it's unproven. No charges have been reported just yet. The stock dropped to around $149 at its low today and closed down about 4% on more than five times normal trading volume. Meanwhile, his rivals jumped 5%, over 5%.

Here's what I think matters though.

This man ran the company for 33 years. He was the face of the entire AI trade. And earnings are Tuesday, the first earnings call without him, five days after he left. That's the real test. Does the machine run without the founder? And the NIO angle, NIO designs its own driving chip. A lot of Chinese car makers are deeply tied to Nvidia. My read is that NIO is less exposed than most. The bet on building its own chip looked expensive two years ago. This week it looks smart. Now to my state, Texas. SpaceX is planning a $24 billion project near Brownsville, a gas-powered plant and what they're calling a super compute facility on about 444 acres. Reportedly, the full plan across Texas and Arizona runs to $74 billion.