Nvidia's earnings, first-quarter revenue expected to rise as AI trade faces latest test

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Nvidia ( NVDA ) is set to report its first-quarter earnings after the bell on Wednesday in what will be one of the most consequential reports for investors this year.

Wall Street is expecting Nvidia to report revenue and profit that rose more than 200% and 400%, respectively, from the year-ago period as the company faces increased demand for its chips amid the AI ​​boom.

Analysts expected adjusted earnings per share to total $5.65 on revenue of $24.69 billion, according to Bloomberg data. The company reported adjusted EPS of $1.09 on revenue of $7.19 billion in the same quarter last year.

Nvidia's stock has been on a tear, rising more than 200% over the past year. The stock is up nearly 700% since the stock market bottomed in October 2022. Shares closed at record highs on Tuesday.

The bulk of Nvidia's revenue will come from its data center business, which will grow to $21 billion from $4.28 billion in the first quarter last year.

The company's gaming division, previously its largest segment, is expected to post revenue of $3.5 billion, up from $2.24 billion in the same quarter last year.

Ahead of Nvidia's earnings announcement, Stifel analyst Ruben Roy raised his price target on the company's share price to $1,085 from $910, saying he expects Nvidia to move up and down again. will beat expectations on the lines and raise its guidance for the next quarter.

Demand for its chips from hyperscalers such as Amazon ( AMZN ), Google ( GOOG , GOOGL ), Meta ( META ), Microsoft ( MSFT ) and others has boosted the company's results, prompting Wednesday's report for more AI. A key check on industry appetite. investment

And as Yahoo Finance's Josh Schafer reported Tuesday, AI trading has moved beyond the tech frontier, with investors looking to energy and power companies as derivative plays on the AI ​​boom.

But Rai, like analysts at BofA Global Research and Loop Capital, say there remain near-term concerns about how much Nvidia's transition from the Hopper line of existing AI chips to the Blackwell line will affect overall sales. .

The fear is that customers will hold back some of their orders for Hopper chips while they wait for Nvidia to develop its more powerful Blackwell products. The Financial Times reported Tuesday that Amazon has put some Nvidia orders on hold as it waits for the more advanced Blackwell line to become available. Amazon later clarified that it had not withheld any orders from Nvidia but had instead shifted an upcoming supercomputer project to Blackwell chips.

Loop Capital's Anand Baroha argued that it's possible for Nvidia to not hold back its Hopper orders without losing its position to companies buying Blackwell chips. If enough customers put their orders on hold in favor of Blackwell chips, Nvidia could see a temporary drop in sales over the quarter.

NVIDIA CEO Jensen Huang shows off products on stage during the annual Nvidia GTC artificial intelligence conference at the SAP Center on March 18, 2024 in San Jose, California. (JOSH EDELSON/AFP via Getty Images) (Josh Adelson via Getty Images)

Nvidia is also countering the threat of its customers building their own in-house AI chips.

So far Amazon, Google, and Microsoft are using — or working toward — their own AI chips that provide better power efficiency than Nvidia's offerings.

That doesn't mean those companies will abandon Nvidia's chips entirely, though the move to their own products could reduce the chip's market share. AMD ( AMD ) and Intel ( INTC ) are gaining steam when it comes to their own AI chips.

On Tuesday, Microsoft announced during its Build conference that it will begin offering AMD's MI300X chips for developers looking to train and deploy AI models. However, the Windows maker made sure to use Nvidia's chips as well.

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Email Daniel Hawley at dhowley@yahoofinance.com. Follow him on Twitter. @DanielHowley.

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