The market has caught NVIDIA (NASDAQ:NVDA) fever ahead of tonight’s second-quarter earnings, here’s a snapshot view of what to watch out for:
What’s the hype?
Nvidia’s last earnings release, in May, triggered a massive rally in the share price as it ‘shattered’ Wall Street expectations – posting US$7.2 billion of revenue, US$1 billion more than analysts predicted.
Since then Nvidia stock blazed into the stock market’s ‘trillion dollar club’ with the Nasdaq stock rising to near US$470 per share, from US$360 prior to the May earnings.
The Nasdaq-listed stock is up more than 220% in 2023 to date and, at this afternoon’s price, it is valued in the market at US$1.1 trillion.
What is the market expecting now?
Well, a lot of giddiness has now been priced in.
Nevertheless, here’s where market consensus stands ahead of this afternoon’s results.
- Revenue: US$11.19 billion
- Earnings per share: US$2.08
Market consensus is pitched close to the very top of Nvidia’s own guidance, which in May was set at US$10.78 billion to US$11.22 billion.
Meanwhile, anything north of US$8.29 billion will be marked the ‘new company record’ label.
The chipmaker that made its sector-leading name in graphics cards is expected to have pulled in US$2.38 billion in gaming-related sales, which would be a 17% improvement year-over-year.
The data-center segment, which makes chips for high-compute cloud services including AI, meanwhile is predicted to have generated over US$8 billion, up from US$3.8 billion in the same period a year ago.
Chance of another outlook upgrade?
Analysts presently see Nvidia’s third quarter (the current quarter) revenue at US$12.59 billion.
Whilst for the full year, they model Nvidia revenue at US$44.54 billion which would be a staggering 71% year-over-year rise if it is achieved.
What are the talking points?
Aside from the financials, the market is keenly awaiting commentary around key technologies and Nvidia’s capacity to satisfy sky-rocketing demand for computing power.
The chipmaker shrugged off its ‘graphics card’ identity through the turn of the decade as its cards and processors increasingly found their way into crypto-currency mining rigs – though it had already been established as a major player in datacenter devices.
It has also been a key supplier into Tesla’s vehicles along with other burgeoning technology segments.
Now, however, the AI boom is seeing an incredible increase in demand for quality, high-performance semiconductors.
Against this backdrop, Nvidia has become the leading name, especially with investors seeking to build portfolios geared to the brave new AI future.
Any snags on the supply chain side that knock the current narrative of rampant positivity could see a spike in volatility in Nvidia stock.
An analyst’s view
A miss against Nvidia’s now high expectations won’t be a big drama, according to California-based stockbroker Wedbush.
Wedbush, in a recent note, claimed the “investment community will correctly look through current quarter expectations towards the potential for stronger results in the out quarters”.
“With demand for AI training having lifted substantially in the past quarter and with no other silicon supplier now capable of providing part volumes within an order of magnitude of NVDA's output, we believe any unfilled demand will just be pushed into forward quarters fueling future sales and earnings per share," the broker said.
Wedbush has an ‘outperform’ rating for Nvidia, with a US$490 price target