Nvidia's Earnings Report: A Barometer for AI Industry Demand

What Nvidia's Earnings Could Say About AI Demand

Strong growth would indicate robust demand for AI infrastructure, and could boost investor sentiment for Nvidia, its partners, and others in the AI space. Artificial intelligence (AI) chipmaker Nvidia (NVDA) is set to report its fiscal second-quarter earnings after the bell Wednesday, with investors likely watching what its results could signal about the strength of AI demand. Nvidia's earning results could be "viewed globally as the most significant 'tell' about the outlook for AI spending," LPL Financial Chief Global Strategist Quincy Krosby said Wednesday, ahead of Nvidia's results. Krosby said that based on analysts' projections, Nvidia's results are expected to "confirm that demand remains strong," which could boost investor sentiment for the stock and others in the AI space. Nvidia has established itself as an early winner of the AI boom, with shares more than doubling in value from the start of the year, despite some headwinds in recent months. Many of Nvidia's partners like Arm (ARM) and Micron Technology (MU), as well as other companies in the AI space, have climbed since the start of the year amid expectations of AI-driven growth. Nvidia shares were 1.9% lower at $125.84 Wednesday afternoon, ahead of the company's earnings, though most analysts maintained a "buy" or equivalent rating for the stock, anticipating further gains.

Nvidia Earnings Preview: Report to Reflect How the AI Trade Is Faring | Investing.com UK

For less than $8 a month, InvestingPro's Fair Value tool helps you find which stocks to hold and which to dump at the click of a button. Investors around the world are waiting for Nvidia's (NASDAQ:NVDA) earnings with bated breath, which is set to be released after the closing bell today. As the driving force behind the recent AI rally, the chipmaker's results would have a ripple effect on the broader technology sector. The last few months have been a roller-coaster ride for the company, with the stock losing about 26% between the high on June 20 and the low on August 5. However, the stock has rebounded sharply ever since, gaining just under 20% in the process. Recently, the bullish rebound's momentum has stalled as investors hold back, waiting for more clarity on Nvidia's performance before making their next moves. Below, we'll take a look at what investors can expect from the keenly anticipated earnings results. As usual, the bar is set very high for Nvidia's earnings. Analysts expect Nvidia to report an EPS of $0.64, up 134% year-on-year, on sales of $28.727 billion, a 109% increase year-on-year. EPS forecasts have also risen significantly over the past 90 days, putting the chipmaker under pressure to deliver results that could drive the stock higher. On the flip side, any indication of weakening demand for AI or cost-cutting from major cloud customers could lead to a significant drop in revenue. Nvidia's guidance for the coming quarters will be crucial, with analysts anticipating growth to slow down, forecasting around 75% growth to $31.7 billion for the current quarter. Nvidia's recent rebound has been fueled by continued strong spending on its data centers and infrastructure, backed by feedback from major customers. Last month, the CEOs of Google (NASDAQ:GOOGL) and Meta (NASDAQ:META) emphasized that underinvesting in AI poses a greater risk than overspending. Investors are also keenly watching for updates on Nvidia's Blackwell chip timetable. Reports earlier this month indicated that production issues might delay the release of this next-generation chip until the first quarter of 2025. Despite Blackwell's potential delay, Nvidia's current chips remain top choices for deploying AI applications like ChatGPT. However, competition from Advanced Micro Devices (NASDAQ:AMD), Google, and various startups is pressuring Nvidia to accelerate the rollout of its next-generation technology. Many analysts have downplayed concerns about the Blackwell chip, suggesting that any revenue delays will likely push forecasts to a later quarter, which could lead to bullish revisions. As Nvidia's earnings report approaches, evaluating the stock's valuation is crucial. Analysts have set an average target price of $143.10, suggesting a potential upside of 11.5%. However, InvestingPro's Fair Value estimate, which integrates multiple valuation models, stands at $109.49, indicating a downside risk of nearly 15%. This discrepancy highlights concerns about the stock's current valuation ahead of the results. For Nvidia to sustain and build on the recent rally, it will need to either exceed earnings expectations or substantially raise its forecasts. More importantly, the results could have a broader impact, influencing investor sentiment and potentially shaping the direction of global stock markets in the weeks to come. ***