Nvidia, the leading chip giant, is set to report its third-quarter earnings after the bell today. With the stock closing at a record high of $504.09 per share on Monday, excitement is building on Wall Street for an update on the fundamentals driving the artificial intelligence (AI) hype cycle. The AI narrative has been propelled by the recent drama surrounding Sam Altman’s departure from OpenAI, the company behind ChatGPT, and his move to join Microsoft. As Nvidia has become the face of the AI story for 2023, expectations are high. Let’s take a closer look at what Wall Street expects in this quarter compared to last year, according to Bloomberg.
In terms of revenue, Wall Street is anticipating $16.1 billion for this quarter, a significant increase from $5.93 billion in the same quarter last year. Adjusted earnings per share (EPS) are expected to be $3.36, up from $0.58 in Q3 last year. Data center revenue is projected to reach $12.82 billion, compared to $3.83 billion last year. For gaming revenue, the estimate stands at $2.7 billion, compared to $1.57 billion in Q3 last year. Investors will also be closely monitoring the company’s revenue outlook, with fourth quarter guidance expected at $17.8 billion. Nvidia’s revenue guidance has surprised investors in the past, and in August, the stock reached an all-time high after smashing Wall Street’s expectations on revenue, EPS, and guidance. In fact, one analyst described the company’s forecast as “guidance for the ages” in May.
Bank of America research analyst Vivek Arya expressed optimism, expecting Nvidia to outperform expectations once again. The firm maintains a positive view on the stock, highlighting its compelling valuation and favorable seasonal trends. However, following the August report, the stock stumbled as questions arose about Nvidia’s valuation, and concerns over chip restrictions in China challenged assumptions about the company’s potential market size. In an SEC filing, Nvidia stated that it does not anticipate any near-term impact from the new restrictions.
Ruben Roy, an analyst from Stifel, believes Nvidia will address these issues in its earnings report. He expects the demand for Nvidia’s products to remain strong globally, particularly in the US and other regions like Europe, Japan, and South Korea, where AI applications are taking off. Roy asserts that Nvidia is well-positioned to capture this growth, especially with the opportunities presented by major cloud service providers.
Throughout this year, Nvidia has been a driving force in the stock market. It is one of the seven “Magnificent Seven” stocks, which also include Apple, Alphabet, Microsoft, Amazon, Meta, and Tesla. Together, these stocks have gained more than 70% this year, contrasting with the 6% increase in the remaining 493 stocks in the S&P 500. Julian Emanuel, a senior managing director at Evercore ISI, emphasized that “it’s still NVDA’s world,” cautioning investors to brace themselves for “post-NVDA volatility,” regardless of which direction the stock goes.
As we await Nvidia’s earnings report, the anticipation and excitement surrounding the AI industry remain high. Nvidia’s performance and outlook will provide valuable insights into the future of AI and its growth potential. The stock market and investors await the numbers that will shape the narrative and steer the AI hype even further.
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