Second-quarter earnings forecast for tech giant Nvidia

NVIDIA is likely to announce tonight that its second-quarter revenue more than doubled. But investors accustomed to its amazing results will expect more from the AI chip giant.

 

Surpassing or failing Wall Street's forecast could fuel or shatter the AI rally on Thursday, a day after NVIDIA reported May-July earnings. The company's stock has seen it rise more than 150% this year, adding $1.82 trillion to its market capitalization and thus lifting the S&P 500 to new highs. The stock is now valued at 37 times its future earnings, compared to an average of about 29 for the six largest tech companies. Those heavy technology companies, including Microsoft, which is spending heavily to build AI infrastructure, have been buying powerful GPUs from Nvidia that allow for large amounts of fast computing. But these chips are difficult to replace in existing data centers, sharply boosting NVIDIA's fortunes.

 

NVIDIA is expected to record a 112% year-on-year jump in second-quarter revenue to $28.68 billion, according to LSEG data as of Aug. 23. But its adjusted gross margin likely fell by more than 3 percentage points to 75.8% from the first quarter, burdened by the cost of increasing production to meet growing demand. NVIDIA is not just a standard for chips, it is also a standard for AI as a whole and if NVIDIA fails, (investors will sell) every AI company.

 

On the other hand, some investors are concerned about the company's ability to meet high expectations and have questioned the pace of AI spending by Nvidia's biggest customers. These concerns have sent Nvidia shares down 20% for most of July and early August, although the recent recovery has left the stock just about 5% below its record high in June. There may be more problems around potential production delays for next-generation Blackwell AI chips for Nvidia. Chief Executive Jensen Huang said in May that the chips would ship in the second quarter, but analysts pointed to design hurdles that could hinder the timeline. This means that revenue growth could be affected in the first half of next year, and margins could shrink if NVIDIA contractor TSMC raises fees, a prospect the Taiwanese company recently hinted at.

 

NVIDIA is likely to expect a 75 percent rise in third-quarter revenue to $31.69 billion, and over the past three quarters, Nvidia's growth has exceeded 200 percent. But it's worth noting that once a company reaches a certain size, it can't actually keep up with the same growth. Some analysts have said that Nvidia could make up for much of the blow caused by delays in Blackwell chips by replacing those orders with previous-generation Hopper chips. The Hopper family of processors isn't as powerful or profitable as Blackwell, but it's enough for most AI-related applications.

0 Comments

Other Articles