Chipmaking giant NVIDIA Corp (NASDAQ:NVDA, ETR:NVD) is gearing up to present its second-quarter results for the 2025 financial year, marking what has quickly become the hottest date on the company news calendar.
We have written extensively on the importance of the Santa Clara-based wunderkind, not just for Nvidia itself but for the technology industry as a whole.
As the leading proxy investment for the artificial intelligence trend, the market is looking to Nvidia’s founder and figurehead Jensen Huang to reset the narrative at a time when initial hype for AI has started to cool off.
Microsoft Corp (NASDAQ:MSFT)’s $81 billion gutting a few weeks ago when it posted great but not great enough earnings shows how much is riding on big tech quarterlies.
But that $81 billion rout could pale in comparison to what’s in store for Nvidia.
In analysing futures contracts on Nvidia shares, Data analytics firm ORATS predicted a potential 9.8% movement on the stock – either up or down – depending on what the results contain.
That’s around $300 billion worth of value at stake, or the entire market capitalisation of Netflix, or Britain’s most valuable company AstraZeneca PLC (LSE:AZN).
Putting the whims of a volatile market aside, there will be a lot to unpack in Nvidia’s earnings at 2pm Pacific time/10pm BST. Let’s check out the ABCs.
A is for Artificial Intelligence
AI, AI, AI. Whether you’re sick of hearing about it or not, AI has been the driving force behind Nvidia’s sextupling of market valuation in the past couple of years.
To oversimplify things, Nvidia makes graphics processing units. Very powerful ones historically used for gaming. It turns out that these units’ parallel architecture is perfectly designed to handle the very high-end processing requirements of AI data centres.
OpenAI knew this when it used some 10,000 Nvidia chips to train its groundbreaking large-language model ChatGPT.
Since then, Nvidia has become the go-to chipmaker for AI applications. Revenues and profits (tallied under the ‘data centre’ revenue line) have multiplied as a result.
This blessing hides an emerging curse though. While the market was more than happy to pump Nvidia’s valuation to stratospheric heights in anticipation of continual demand for its high-end, high-priced chips, it has also created huge expectations.
If Nvidia’s forward guidance shows sales demand starting to normalise, it could prompt a 12-figure repricing of the stock.
Microsoft discovered this when its cloud-computing platform Azure missed expectations by an accounting error; it could happen to Nvidia too.
B is for Blackwell
Nvidia is not one to rest on its laurels. Certainly not under the leadership of Huang. Rather, tens of thousands of employees have sought to make increasingly powerful processors for the increasingly compute-hungry appetites of its blue-chip client base.
Enter Blackwell, Nvidia's next flagship AI chip which serves as the next generation after the current H100 model.
Named after David Harold Blackwell, the first black scholar inducted into the National Academy of Sciences, Blackwell was initially tipped to drop before the end of 2024, but there are rumours of delays until the new year.
This is reportedly due to a hold up at Nvidia’s semiconductor manufacturing partner TSMC.
When Nvidia unveiled Blackwell in March, it promised to enable “organisations everywhere to build and run real-time generative AI on trillion-parameter large language models at up to 25x less cost and energy consumption than its predecessor”.
“For three decades we’ve pursued accelerated computing, with the goal of enabling transformative breakthroughs like deep learning and AI,” said Huang. “Generative AI is the defining technology of our time. Blackwell is the engine to power this new industrial revolution. Working with the most dynamic companies in the world, we will realise the promise of AI for every industry.”
Industry big shots including Mark Zuckerberg, Sam Altman and Elon Musk have praised Nvidia’s ambitions with Blackwell.
But without a concrete launch date and assurance that supply will meet demand (or indeed vice versa), there could be a degree of short-term share price instability.
C is for China
China is big business for Nvidia. But not as big as it could be. We can thank a China-US trade war for that.
In short, under export controls imposed by the Biden administration in October 2022, Nvidia is forbidden from supplying its cutting-edge microchips to the Chinese market.
The US worries that high-end designs, specifically the H100 AI chip, pose a national security threat since they can be used in military applications.
Nvidia attempted to satisfy these export controls by designing a stripped-back version of the H100 called the H800, only for this to come under even stricter sanctions in 2023.
Suffice to say, China sales are an issue. In the year ending 28 January 2024, China revenues plus Hong Kong contributed 17%. A year earlier it was 21.4%. Another year earlier it was over 26%.
Nvidia said this in January: “Our competitive position has been harmed, and our competitive position and future results may be further harmed in the long term if there are further changes in the (US Government’s) export controls.”
Investors will be extremely eager to hear from Huang and Co how they intend to navigate this fraught macroeconomic situation.