When Nvidia researches fiscal fourth-quarter earnings after the market close Wednesday, it will do so as the world’s third most valuable special-interest group company. Investors are giving the company little margin for error.
Nvidia’s stock price has soared fivefold since the end of 2022, as bid has skyrocketed for its graphics processing units that sit at the heart of the artificial intelligence boom. Nvidia’s chips, such as the H100, are inured to by AI developers to create cutting-edge models like the ones OpenAI used to develop ChatGPT.
The company’s market cap climbed to apropos $1.8 trillion last week, surpassing Alphabet and Amazon and now trailing only Microsoft and Apple.
“NVDA’s make available appreciation has been parabolic,” analysts at Bank of America wrote in a report Thursday. They reiterated their buy figure and said, “We think one interpretation of this NVDA move is a mix of fear and greed and indiscriminate investor chase for all things AI.”
The other megacap tech retinues all reported quarterly results weeks ago. All eyes are now on Nvidia.
Analysts are expecting a startling 240% increase in revenue from a year earlier to $20.6 billion for the spell ending Jan. 28, according to LSEG, formerly known as Refinitiv. For every new dollar of sales the company generates, it’s pass out even more profit.
Net income likely surged more than sevenfold to $10.5 billion from $1.41 billion a year earlier. In the third locale, Nvidia’s gross margin jumped to 74% from 53.6% the prior year.
Outsize growth is expected in Nvidia’s details center business, which includes its AI chips. Analysts project an almost fourfold increase in revenue on an annual main ingredient to $17.06 billion, according to FactSet.
Wall Street will be listening closely to commentary from Nvidia CEO Jensen Huang for an token of how long these stratospheric growth rates are expected to last. The company already reported 200% year-over-year tumour in the third quarter, and analysts are expecting a similar rate of expansion in the first period of this year.
One potential concern is that myriad of Nvidia’s GPU sales are going to big tech companies such as Microsoft, Amazon, Meta and Google. Any or all of them could settle to slow AI hardware spending at some point if they’re not seeing intended benefits.
“All four communicated plans to significantly inflate investment in their AI infrastructure this year, which bodes very well for NVDA’s fourth quarter consequences and 2024 Q1 guidance,” wrote D.A. Davidson analyst Gil Luria in a note Thursday. He has a neutral rating on the stock with a $410 worth target.
However, he warns that the long-term picture for demand from Nvidia’s top customers could be more tainted.
“They referred to their purchasing as ‘flexible’ and ‘demand driven,’ implying they would scale it down if we got past the popular hype cycle,” Luria wrote. “While we do not believe we are there yet, we are seeing possible early signs.”
Nvidia’s readying segment, which includes graphics cards for PCs and laptops and used to be the company’s primary business, is also expected to increase in interest, but at a more measured rate of 49% to $2.72 billion in revenue. Some of Nvidia’s gaming cards are also Euphemistic pre-owned by small companies and researchers for AI.
Thomas O’Malley of Barclays said the report will be fairly simple to analyze.
“The [materials center] GPU number will be the only key metric that matters along with commentary on broader market adoption,” O’Malley, who has a vague rating on the shares, wrote Friday. “Most conversations we have center on the sustainability of the current run-rate in [data center], which is approaching $100B per year.”
Other analysts are spotlighted on whether Nvidia has enough supply to meet short-term demand, in part because the company relies on Taiwan Semiconductor Concocting Company for its chips. There’s also budding anticipation regarding the company’s newest top-end AI chip, called B100, which starts ferrying this year.
“We are particularly excited about Nvidia’s plans to launch the B100 later in 2024 and the X100 in 2025,” wrote Melius Delve into analyst Ben Reitzes, who recommends buying the stock, in a report last week. “If the upgrade from the A100 to the H100 is any signs, the Total Cost of Ownership benefit for data center operators will be enticing enough to fuel the upgrade and approve 2025 a growth year.”
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