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Nvidia (NVDA) will report its second-quarter earnings after the closing bell next Wednesday, marking the biggest test of the AI hype cycle yet.
During the AI gold rush, companies around the world looking to profit turned to Nvidia graphics processors to power new AI software and platforms.
Currently, tech companies of all sizes are doing everything they can to get Nvidia chips. During Tesla’s (TSLA) second-quarter earnings call, CEO Elon Musk told analysts that the automaker will take as many Nvidia graphics processors as the company can produce.
This kind of demand is also why Nvidia dismantled Wall Street’s forecast for its guidance for the second quarter during its latest earnings call. At the time, analysts were expecting $7.2 billion in revenue, but Nvidia said it would make about $11 billion in the quarter — a 64% jump from a year ago — which Wall Street analysts now expect next week.
The Street also expects earnings of $2.07 per share, up 306% year-over-year. Nvidia’s used to huge numbers, but those numbers set high expectations for next week’s report, and the stock is already soaring.
“What Nvidia announces in its next earnings release will be a measure of all the AI noise,” explained Forrester analyst Glenn O’Donnell. “I expect the results are going to look really great because the demand is so high, and that means Nvidia is able to command higher margins than it would have otherwise.”
But those high expectations mean that if the company doesn’t deliver, it could seriously dampen the AI explosion and cause a shockwave through AI deals ranging from Microsoft and Google to Meta and AMD.
Wall Street all in Nvidia
In early New York trading on Tuesday, Nvidia stock reached $445. Year-to-date, the company’s shares are up a staggering 204%. Wall Street analysts are still bullish on the stock.
In a research note Tuesday, Wells Fargo’s Aaron Rackers increased his price target on Nvidia from $450 to $500. Baird’s Tristan Gera shifted his target for the stock from $475 to $570, adding that “the demand for AI is rising at all levels: individuals, organizations, and hypers.”
Morgan Stanley’s Joseph Moore offers a similarly rosy view of the company, writing in a research note that “NVIDIA remains our top pick, against the backdrop of a massive shift in spending toward AI, and an exceptional supply-demand imbalance that should persist into the next several quarters.” The recent sell-off is a good entry point.”
UBS’s Timothy Arcuri also raised his price target on Nvidia, writing in a note that the company “acts quite literally as a ‘kingmaker’ as a huge wave of capital and new financing vehicles chases new AI software and specialized cloud infrastructure models.” “
Nvidia is the pre-eminent maker of both the high-powered graphics chips needed to run AI software and the software needed to develop those AI platforms. The company has been preparing for this moment for years, researching and working on its AI capabilities before Wall Street jumped into the AI frenzy with the launch of OpenAI’s generative ChatGPT AI platform in late 2022.
Since then, Microsoft (MSFT), Alphabet Corporation (GOOG, GOOGL), Meta (META), Amazon (AMZN), Intel (INTC), AMD (AMD), and a cadre of AI neighbors have positioned themselves as strong centers of artificial intelligence.
