Nvidia's Q2 Earnings: A Pivotal Moment for AI and Tech Stocks

Nvidia is about to test the nerves of AI investors

This story is available exclusively to Business Insider subscribers. Become an Insider and start reading now. Have an account? Log in. The Santa Clara-based firm has, of course, been one of the surest bets for investors seeking to cash in on the generative AI boom, with its share price up a staggering 168% this year and a valuation close to $3.2 trillion. Demand for its chips, or GPUs, has remained strong as Big Tech firms strive to build increasingly powerful AI models that deliver transformational change. Nvidia's revenue in the last quarter was a record $26 billion. That said, there are two good reasons investors have seemed agitated. The first reason is simple. In recent weeks several Big Tech firms have said that investors fear spending on AI infrastructure -- much of it with Nvidia -- is unlikely to generate meaningful returns anytime soon. Google raised the alarm first when it reported earnings in late July, as its CEO Sundar Pichai struggled to respond to investors' questions on a call about AI's impact on revenue. Though Pichai said the "risk of underinvesting is dramatically higher than overinvesting," it was hard for investors to ignore the fact that capital expenditure -- which almost doubled year-on-year to $13 billion last quarter -- was surging. The story was similar for Microsoft, which posted earnings days later. Despite reporting a 15% year-on-year revenue jump to $64.7 billion, CFO Amy Hood told analysts that returns from AI should be expected in "the next 15 years and beyond." For those who favor AI's long-term prospects, the patience being asked of them will be worthwhile. Wedbush analyst Dan Ives, who has called Huang the "godfather of AI," expects Wednesday's results to be "another drop-the-mic moment for tech" as Nvidia talks up demand through 2025. But it's not clear everyone feels that way, which brings us to the second reason investors are anxious: more and more of them have a gut feeling that the broader AI market is in bubble territory. Earlier this month, The Financial Times reported that hedge fund Elliott Management told investors that Nvidia stock was "overhyped," and it was "skeptical" about the relentless Big Tech demand for GPUs. A June report from Goldman Sachs also suggested the industry was in bubble territory. Jim Covello, the bank's head of global equity research, said that although "bursting today's AI bubble may not prove as problematic as the bursting of the dot-com bubble," given that big AI spenders are "better capitalized," it could be a problem if AI "ends up having fewer use cases and lower adoption than consensus currently expects." That brings us back to Nvidia. If the company forecasts chip demand to be as hot as ever, expect short-term anxieties to fade away. It'll signal that its customers still have every intention of building AI that proves to be industry-shaking and profit-making. Anything else, however, could mark the start of a much more difficult chapter in the AI story.

Nvidia earnings are the most important stock market event of the year, analysts say

Nvidia is set to release second-quarter earnings next week, with all eyes on the chipmaker that has become a bellwether for the artificial intelligence boom. The Santa Clara, California-based semiconductor manufacturer is "the foundation for the AI Revolution," researchers at Wedbush, led by Dan Ives, said in a note Thursday. Despite investor attention on the Federal Reserve chair Jerome Powell's speech at the Jackson Hole conference Friday, Ives wrote that Nvidia's (NVDA) Aug. 28 earnings report will be the defining event of the year. "We believe the most important week for the stock market this year and potentially in years for the Street will be next week as the Godfather of AI Jensen and Nvidia have earnings on deck," Ives said, referring to Nvidia chief Jensen Huang. While investors have remained cautious, particularly after a stock market rout sparked fears of a recession and concerns over an end to the tech boom, Ives said the current moment is "a 1995 (almost 1996) start of the Internet Moment and not a 1999 Tech Bubble-like moment." Ives is expecting another "drop the mic performance" from Nvidia. Its chips, which are used to train generative AI models at nearly major tech company, are the "new oil and gold in this world," he said. Nvidia is also currently the only firm with $1 trillion in capital expenditure designated for AI over the next few years, putting it leaps and bounds ahead of its competitors. The company is expected to bring in $28.72 billion in revenue for the second quarter, according to estimates compiled by FactSet. That would be another record for the chipmaker. Wall Street is also projecting $14.98 billion in net income, with an earnings per share of $0.65. In the first quarter, Nvidia reported $26 billion in revenues -- a 262% increase from a year prior. After reporting those results, Nvidia's stock price passed $1,000 for the first time. At the time, analysts at Wedbush called the company's record performance a "masterpiece quarter" and the "ultimate barometer of the AI Revolution." Despite Wall Street's bullish outlook, Nvidia's stock fell 3.7% to $123.74 apiece Thursday, bringing its market capitalization to $3.04 trillion. Shares were up 1.25% in pre-market trading Friday. Tech earnings are picking up next week, with Cloud-based software company Salesforce reporting on Wednesday. The company's report will provide an important guide for tech stocks, Ives said. Salesforce (CRM) "very soft performance" last quarter, missing revenue expectations for the first time since 2006. Overall, however, Ive remains optimistic that tech stocks will continue to barrel forward. "We focus with eyes on the prize: the AI buildout and the tech winners of this 4th Industrial Revolution," Ives said. "And tech earnings season has only bolstered and validated this bullish view of tech stocks heading into year-end and 2025 with another masterpiece quarter next week expected from Nvidia helping the Street figure out the next frontier and winners in this AI Revolution."

Prediction: On Aug. 28, This Figure From Nvidia Will Confirm an Artificial Intelligence (AI) Bubble That's in the Early Stages of Bursting | The Motley Fool

This all-important metric is likely to signal that the euphoria surrounding artificial intelligence (AI) is beginning to fade. Since 2023 began, no trend has been more responsible for lifting Wall Street's major stock indexes to new heights than the rise of artificial intelligence (AI). The allure of AI is the long-term capacity for software and systems to learn without human intervention. This gives AI-driven software and systems the ability to become more efficient at their tasks, and potentially evolve to learn new skills. With an addressable market that spans most sectors and industries, the analysts at PwC believe AI can add a jaw-dropping $15.7 trillion to the global economy come 2030. Although dozens of companies have benefited from the AI revolution, none has been the poster child of success more so than semiconductor giant Nvidia (NVDA 4.55%). In short order, Nvidia's H100 graphics processing unit (GPU) became the go-to chip used by businesses to run generative AI solutions and train large language models (LLMs). With demand swamping supply, Nvidia has had no trouble meaningfully increasing the price of its H100 GPUs to between $30,000 and $40,000 per chip, or roughly two to three times what key rivals are charging for their AI-data center hardware. The beauty of higher price points is that they have directly benefited Nvidia's bottom line. Over the previous five reported fiscal quarters, ended April 28, 2024, the company's adjusted gross margin has increased by close to 14 percentage points to 78.35%. Nvidia hasn't been shy about investing for the future, either. Its next-generation Blackwell platform, which is slated to hit the market next year, will accelerate computing capacity in six areas, including quantum computing and generative AI, and be more energy efficient than its predecessor. Meanwhile, in June, CEO Jensen Huang briefly teased the all-new Rubin GPU architecture, which will run on a different processor (known as Vera) and debut in 2026. The final piece of the puzzle that's helped Nvidia's market cap grow by more than $2.8 trillion since the start of 2023 is its CUDA platform. This is the software platform developers use to build LLMs, and it's working hand-in-hand with the company's leading hardware to keep enterprise clients loyal to its ecosystem of solutions. Although it's been a seemingly perfect operating ramp, Wall Street is liable to see just how fallible Nvidia and AI as a technology are as a whole on Aug. 28. This coming Wednesday, Aug. 28, Wall Street's AI darling will lift the hood on its fiscal second-quarter operating results. Over the previous five quarters, Nvidia has done nothing short of obliterate even the loftiest analyst expectations. A combination of strong enterprise demand for its AI-GPUs, exceptional pricing power, and limited competition, has allowed the company to build up a backlog that would make any tech company envious. However, headline revenue and profit figures aren't going to tell the complete story come Aug. 28. Even if sales and profits sail past the consensus of analysts, another key figure can portend the end to AI euphoria. I'm talking about Nvidia's adjusted gross margin. Nvidia's "adjusted" gross margin excludes the impact of stock-based compensation, acquisition-related expenses, and a few other costs. Following the release of Nvidia's fiscal first-quarter results, Huang and his team offered adjusted gross margin guidance for the fiscal second quarter of 75.5% (+/- 50 basis points). This guidance implies a 235- to 335-basis-point decline from the first quarter. While a median expected drop of 285 basis points in adjusted gross margin might sound like much ado about nothing considering the roughly 1,370 basis points Nvidia's adjusted gross margin expanded by over the prior five quarters, it's the reasons behind this forecast decline that are the real concern. Although demand has been undeniably strong for Nvidia's H100 GPU, it's the company's pricing power that's done most of the heavy lifting. Sales growth has handily outpaced an increase in cost of revenue, signaling that pricing power, fueled by persistent AI-GPU scarcity, is the company's core driver. The problem for Nvidia is that it's not the only show in town. Advanced Micro Devices (AMD 2.16%) is ramping up production of its MI300X AI-GPUs, which are, on average, 50% to 75% cheaper than Nvidia's H100. AMD also hasn't been hindered by early stage chip fabrication supplier issues in the same way Nvidia has. Furthermore, Nvidia's four-largest customers by net sales -- Microsoft, Meta Platforms (NASDAQ: META), Amazon, and Alphabet -- are all internally developing AI-GPUs for their data centers. Even with these internally developed chips destined for complementary roles, they're ultimately cheaper and more easily accessible than Nvidia's hardware. These companies represent about 40% of Nvidia's sales, and they're all signaling a reduced future reliance on Wall Street's AI darling. To make matters worse, reports emerged a little over two weeks ago that Nvidia's prized Blackwell chip would be delayed by "at least three months" due to design flaws and supplier constraints. Nvidia not being able to meet enterprise demand in a timely manner opens the door for AMD, Samsung, and Huawei to steal share. Nvidia's biggest gross margin lift has come from AI-GPUs being extremely scarce. But as new chips hit the market, and the company's own top customers fill their valuable data center "real estate" with in-house chips, Nvidia will inevitably find that its pristine pricing power is eroding. The company's median forecast of a 285-basis-point sequential-quarter drop in adjusted gross margin is evidence that AI euphoria is fading. Looking beyond Nvidia's Aug. 28 report, history is another monkey wrench for the AI revolution. Since the advent of the internet three decades ago, there hasn't been a single innovation, technology, or buzzy trend with a mammoth addressable market that's avoided an early stage bubble-bursting event. Without exception, investors always overestimate the use case(s) and consumer/enterprise uptake of a new technology or trend, which eventually leads to disappointment, euphoria fading, and a bubble-bursting event. Including the internet, we've watched this play out with genome decoding, business-to-business commerce and networking, housing, China stocks, nanotechnology, 3D printing, cryptocurrency, cannabis, blockchain technology, virtual/augmented reality, and the metaverse. To add to the point, you'll find that few of the companies building out AI data centers have definitive plans for how they're going to use the technology to increase sales and profits. For instance, Meta Platforms is investing more than $10 billion in Nvidia's H100 GPUs, but has no immediate plans to profit from these investments in its AI data center. The simple fact that most businesses lack a clear game plan when it comes to AI makes it crystal clear that we're dealing with the next in a long line of bubbles. This isn't to say that artificial intelligence can't, eventually (key word!), change the growth arc in a big way for corporate America -- but there's little question that the technology will need time to mature. If the AI bubble does burst, as history suggests it will, there isn't a company that'll be hit harder than Nvidia. It's adjusted gross margin in the coming week should provide confirmation that the beginning of this bubble-bursting event is underway.

Nvidia Jumped Today -- Is the AI Stock a Buy Ahead of Its Big Q2 Release on Aug. 28?

Nvidia stock has soared 161% this year, and now it's on the verge of a massive test. Nvidia (NVDA 4.55%) posted big gains in Friday's trading. The artificial intelligence (AI) frontrunner's share price closed out the daily session up 4.6%, according to data from S&P Global Market Intelligence. In a note published this morning, Evercore maintained an outperform rating on Nvidia stock heading into earnings and raised its price target from $145 per share to $150. At the time of the note's publication, the new price target suggested upside potential of 19%. In addition to the bullish analyst coverage, Nvidia stock got a boost from comments made by Federal Reserve Chairman Jerome Powell this morning. Powell stated that the time had come for a shift in interest rate policy, which strongly suggests the Fed will deliver a rate cut with its September meeting. Lower interest rates tend to be a bullish catalyst for the stock market at large, and low-rate environments often power particularly strong gains for growth stocks. With this week wrapped, attention turns to Nvidia's big earnings report next week. The AI leader is scheduled to publish its second-quarter results after the market closes on Aug. 28. It will be one of the most closely watched events in the stock market this year. Is Nvidia stock a buy heading into its highly anticipated Q2 report? With its last update, Nvidia guided for revenue of roughly $28 billion and a non-GAAP (adjusted) gross margin of 75.5% in fiscal Q2. Wall Street thinks the business will deliver even better results, with the average analyst estimate calling for revenue of $28.6 billion. Nvidia has crushed sales and earnings expectations over the last year, and signs suggest the business will deliver another round of performance beats when it publishes earnings next week. In particular, capital expenditure data and guidance from big customers, including Microsoft and Meta Platforms, suggest that the AI chip leader is in a good position to deliver a significant sales beat. But investors should keep in mind that lofty expectations ahead of the big Q2 release could also set the stage for volatility. With reports that Nvidia could be delaying its next-generation Blackwell processors and forward guidance under the microscope, there's a risk that the tech giant's share price could see a pullback, even if last quarter's revenue and earnings beat expectations. Ultimately, Nvidia's strong competitive positioning in AI means the stock still looks like a smart buy for long-term investors. But the potential for volatility heading into the company's Q2 report suggests that employing a dollar-cost-averaging strategy may be a better move than pouring into the company all at once.

Nvidia's upcoming Q2 results are 'most important in years,' Wedbush says

Nvidia (NASDAQ:NVDA) is slated to report fiscal second-quarter results on August 28 after the close of trading, and Wedbush Securities said the event is likely to be the "most important" in years for the technology sector. "While the market and global economic direction is laser focused on Jackson Hole this week with the Fed and Powell beginning its path/communication to cut interest rates, we believe the most important week for the stock market this year and potentially in years for the Street will be next week as the Godfather of AI Jensen [Huang] and Nvidia have earnings on deck," analyst Dan Ives wrote in an investor note. For the actual print, Nvidia likely to have another "drop the mic performance," Ives added, as he characterized the company as "the only game in town" when it comes to artificial intelligence and GPUs. A consensus of analysts expects the company will earn $0.64 per share on $28.67B in revenue for the upcoming quarter. "The cloud numbers and AI data points from [Microsoft], Amazon, and Google were very strong during earnings season the last few weeks as this indicates massive enterprise AI demand is now underway," Ives explained. For every $1 spent on an Nvidia GPU, the tech sector could reap between $8 and $10 in added benefit, Ives added.

Will Nvidia Deliver Again in Its Upcoming Quarterly Results? | Investing.com UK

Alongside Jensen, insider sales amounted to 7.2 million shares over the last six months against the 1.3 million NVDA shares bought, giving a lopsided insider sale-to-purchase ratio of 5.5. Given strong recession signals going into 2025, should investors expect further selloffs after Nvidia's next earnings report on August 28th? Or would another market pullback constitute a similar "buy the dip" opportunity? Over the last six quarters, Nvidia has consecutively beat earnings per share (EPS) expectations, with the quarter ending April beaten by a positive surprise of 13.73%, or $0.51 forecasted vs. $0.58 EPS reported. For the fiscal quarter ending July 2024, which is scheduled to be reported on August 28th, Zacks Investment Research places an EPS consensus of $0.59 based on 13 analyst forecast inputs. In the prior quarter, Nvidia gave an outlook of $28 billion in revenue (+/- 2%) from Q1's $22.6 billion, which itself tracked a 427% year-over-year growth. In other words, Nvidia is the primary beneficiary of generative AI infrastructure demand and expectations. But is that likely to continue? Nvidia's Blackwell architecture is the next step in Nvidia's AI chip dominance. It was first unveiled at the GTC 2024 conference in March. Aimed at cost-effective training of large language models (LLMs), Blackwell chips pack 208 billion transistors using the cutting-edge 4NP (node process), courtesy of Taiwan Semiconductor Manufacturing Company (NYSE: TSM). For AI workloads, Nvidia claims up to 25x reduced operational expenditures. For comparison, Blackwell would be 30x more efficient for LLM inference workloads against Nvidia's H100 chips, which went into full production in September 2022. At that time, NVDA stock was priced at an incomprehensibly low point of ~$13 per share. Suffice to say, investors expect a similar growth post-Blackwell, although it will be much subdued by Nvidia's over-$1 trillion market weight. In early August, Microsoft (NASDAQ:MSFT) insiders leaked to The Information that chip-on-wafer-on-substrate (CoWoS) packaging complexities will lead to Blackwell shipments delay until Q1 2025. However, KeyBanc Capital Markets equity researcher John Vinh noted that Blackwell delay will be neutralized by the remaining Hopper (H100 and H200 series) backlog. "There's going to be no near-term impact on that Blackwell delay in terms of their Q2 results and Q3 guidance. Blackwell was originally only going to start ramping maybe towards the end of the July quarter." John Vinh to Yahoo Finance's Market Domination But as Hopper backlog clears up by the end of the year, and Blackwell chips ramp up in the second half of 2025, investors should expect less impressive quarterly reports in that interim period. Since fiscal Q4 2023, Nvidia outgrew its origin story. The company firmly and rapidly transitioned from a video gaming GPU company to data center supplier company. While Nvidia's gaming revenue is not much different from Q1 FY2022 level, its data center division ballooned by 6x. Image credit: AppEconomyInsights Relative to its competitors within the semiconductor sector, Nvidia holds 34.84% market share leaving behind AMD at 9.78%, Broadcom (NASDAQ: NASDAQ:AVGO) at 18.61% and Intel (NASDAQ:INTC) at 24% market share. Within the global GPU market, Nvidia holds near total dominance at 88% vs Advanced Micro Devices Inc's (NASDAQ:AMD) 12%, according to Jon Peddie AIB shipments data for Q1 2024. Nvidia accomplished these market dominance feats by tethering its hardware to a full-stack software ecosystem. For machine learning specifically, the company optimized numerous open-source frameworks and libraries such as TensorFlow, PyTorch, JAX, DGL, NeMo, Kaldi, and others. In other words, Nvidia followed an established pattern of creating standards for the most streamlined developer experience. Starting with the present CUDA (Compute Unified Device Architecture) platform, this approach hails back to Nvidia PhysX, RTX (real-time ray tracing), DLSS, and G-Sync standards. To stay ahead in the data center AI business, AMD recently made an aggressive move by acquiring ZT Systems for $4.9 billion. When it comes to Intel, Blackwell's delay should provide the emerging foundry giant with an opportunity to expand with its cost-effective Gaudi 3 chips. After all, both AMD and Nvidia are fabless companies reliant on TSMC capacities, while Intel engages in costly foundry buildup. Notwithstanding more market pullbacks depending on recession signals materializing, NVDA stock is still a highly sought equity. According to Nasdaq forecasting data based on 39 analyst inputs, the average NVDA price target is $150.29 against the present $128.47 per share. The high estimate goes as high as $200 while the low forecast is not that far from the present price at $100 per share. According to Mordor Intelligence, the global AI infrastructure market size is forecasted to grow at a CAGR of 20.12% between 2024 and 2029. By all indicators, it is unlikely that Nvidia's competitors will significantly infringe on the company's successful implementation of cutting-edge hardware within its comprehensive software framework. ***

Nvidia Stock Surges as Earnings Expectations Grow

Expectations for Nvidia's (NVDA) earnings release Wednesday are on the rise, in what could make it harder for the artificial intelligence (AI) darling to impress investors. Consensus estimates for Nvidia's second-quarter revenue rose by $170 million to $28.84 billion in the last 48 hours alone, according to estimates compiled by Visible Alpha, while net income projections rose $120 million to $14.95 billion. Whisper numbers could be even higher, with some analysts having long voiced concerns about investors' expectations exceeding Wall Street projections. Wedbush analysts said Thursday they expect "another drop the mic performance from Nvidia," citing signs of "massive enterprise AI demand" and spending by cloud giants such as Amazon (AMZN) and Alphabet's Google (GOOGL), all trends that would benefit the chipmaker. They're not alone, as analysts from Raymond James, KeyBanc, and elsewhere recently said they expect a strong quarter from the chipmaker as well, despite concerns about a reported delay in Nvidia's Blackwell AI chip. Over 95% of analysts tracked by Visible Alpha have a "buy" rating for the stock, with a consensus price target of $144.83, 12% above Friday's closing price. Nvidia shares gained 4.6% Friday to close at $129.37. The stock has gained about 160% since beginning of the year.

What You Need To Know Ahead of Nvidia's Earnings Report

The chipmaker could also comment on reports that its Blackwell chip is delayed. Nvidia (NVDA) will report second-quarter results for fiscal 2025 after the bell on Wednesday, Aug. 28, with investors likely watching for sustained data center growth and any updates on reported delays affecting the new Blackwell artificial intelligence (AI) chip. Analysts project revenue will grow to $28.84 billion, according to estimates compiled by Visible Alpha, which would be more than double Nvidia's revenue in the same period a year ago. Net income is also expected to more than double from a year earlier to $14.95 billion, with a sharp decline in earnings per share (EPS) expected primarily as a result of the company's 10-for-1 stock split.