Leading provider of AI chips, Nvidia, releases its fiscal first-quarter earnings on Wednesday after the market closes. Wall Street is expecting a slowdown after the company’s previous explosive growth.
However, given that its processors are still in high demand for data centers using generative artificial intelligence, the numbers for the quarter that ended in April will be spectacular.
FactSet polled analysts predict that revenue will rise 241% to $24.5 billion, and profits per share will climb 474% to $5.22. It would be less than the 265% increase in revenue and 765% increase in earnings from the previous quarter.
In the meantime, the stock has increased by around 200% from a year ago and has jumped 87% thus far in 2024. With a market valuation of $2.3 trillion, Nvidia is currently the third most valuable corporation in the world, behind only Apple and Microsoft. But over the past two months, shares have virtually remained unchanged.
Some experts have predicted a slowing in the company’s shift from its older H100 CPUs to the next-generation ones, which are anticipated to go on sale later this year, following Nvidia’s introduction of its new Blackwell chip in March.
Bank of America analysts noted this slowdown as a possible cause of volatility in Nvidia shares following the release of the company’s earnings on Thursday in a note.
Analysts anticipate that Nvidia’s second-quarter projection will be the first time sequential growth would be less than 10%, even if BofA believes the firm is presenting strong statistics in comparison to the Wall Street consensus.
Gross margins are predicted to decline from roughly 77% in the first quarter to a “more normalized” range of 75%–76% in the second quarter.
“However, even if NVDA were to potentially deliver on these bullish expectations, the stock could still react unfavorably as bears will likely complain that: 1) NVDA QoQ sales growth will decelerate to ‘only’ 7-8% QoQ in FQ2 (Jul) outlook, well below the mid-teens or better the last few quarters, 2) [gross margin] peaking and decline is a sign of pricing pressure, unfavorable mix (more China H20 shipments and/or more inference units) and slowing demand/easing supply,” the analyst note stated.
BofA, for its part, is bullish on Nvidia, rated the company as a “buy” and setting a price objective of $1,100, implying a 19% gain from Friday’s finish.
Morgan Stanley analysts were likewise optimistic about Nvidia last month, stating that underlying demand remained strong and there were no indications of a growth stop during the switch to the Blackwell chip.
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Analysts stated that “NVDA continues to see strong spending trends in AI, with upward revisions in demand from some of the newer customers such as Tesla and various sovereigns.”
Furthermore, Nvidia is expected to hold onto its market share by Morgan Stanley despite growing competition from the likes of Intel, Huawei, Samsung, and others.
“Price of the Blackwell generation looks to make a strong competitive statement—reducing enthusiasm for offerings from competitors,” it continued.