Nvidia (NVDA) is preparing to release its third-quarter earnings report on Tuesday, and investors are eager to gain insight into the fundamentals driving the artificial intelligence (AI) hype cycle. The company’s stock reached a record high of $504.09 per share on Monday, with AI once again capturing the attention of investors due to Sam Altman’s departure from OpenAI and his subsequent move to Microsoft (MSFT).
The expectations for Nvidia are high, as the company has become synonymous with the AI narrative for 2023. Bloomberg compiled analysts’ predictions for Nvidia’s performance in the third quarter compared to the same period last year. The consensus estimates are as follows:
– Revenue: $16.1 billion expected versus $5.93 billion in Q3 last year
– Adjusted EPS: $3.36 expected versus $0.58 in Q3 last year
– Data center revenue: $12.82 billion expected versus $3.83 billion in Q3 last year
– Gaming revenue: $2.7 billion expected versus $1.57 billion in Q3 last year
Investors will also be closely monitoring Nvidia’s revenue outlook, with Wall Street anticipating fourth-quarter guidance of $17.8 billion. The company’s revenue guidance has been a source of surprise for investors throughout 2023.
In August, Nvidia’s stock reached an all-time high after the company reported second-quarter results that exceeded Wall Street’s expectations in terms of both revenue and earnings per share. The company also provided guidance that surpassed lofty estimates, leading one analyst to describe it as “guidance for the ages.”
Bank of America research analyst Vivek Arya expressed confidence in Nvidia’s ability to beat consensus estimates once again. The firm remains positive on the stock, highlighting its “compelling” valuation and noting favorable seasonal trends.
However, following the August report, Nvidia’s stock experienced a few months of turbulence as investors began to question the company’s valuation. Additionally, updates on chip restrictions in China raised concerns about the potential size of the market Nvidia could sell into.
Nvidia addressed these concerns in an SEC filing, stating that it does not expect any immediate impact from the new restrictions. Stifel analyst Ruben Roy expects Nvidia to echo this sentiment during its earnings release.
Roy emphasized the global demand for Nvidia’s products, particularly outside of China. He believes that cloud service providers in the US and other regions, such as Europe, Japan, and South Korea, present significant opportunities for Nvidia. He concluded that Nvidia remains the best way to position for the growth of AI.
Throughout this year, Nvidia has been a driving force in the stock market, contributing to the success of the “Magnificent 7” stocks, which also include Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), and Tesla (TSLA). Together, these stocks have gained over 70% in 2023, while the remaining 493 stocks in the S&P 500 have risen by only 6%.
Julian Emanuel, senior managing director at Evercore ISI, warned investors to brace themselves for “post-NVDA volatility,” regardless of which direction the stock moves.
In summary, Nvidia’s upcoming earnings report is highly anticipated, with investors eager for updates on the AI landscape. Wall Street expects impressive performance from the company, and Nvidia’s stock has been a standout performer in the market this year.
