Nvidia reports earnings after Wednesday’s close. Shares have more than tripled this year.
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Nvidia is in the driver’s seat.
Nearly everyone realizes demand for the company’s artificial intelligence chips will likely outstrip supply for a while. The critical question for investors when
Nvidia
(ticker: NVDA) reports earnings results after Wednesday’s close is not what to make of the near-term situation, but whether or not the company can show progress in alleviating its supply constraints over the longer term.
Wall Street consensus estimates call for
Nvidia
to report July quarter revenue of $11.2 billion, with adjusted earnings per share of $2.08. Analysts’ estimate for the current quarter’s revenue is $12.6 billion.
Nvidia dominates the market for producing chips used for AI projects, making it the primary beneficiary of the generative AI trend. This type of technology is used by chatbots, among them OpenAI’s ChatGPT—which unleashed a wave of excitement after it was released late last year.
Start-ups and corporations prefer Nvidia’s chips because of its robust software programming platform ecosystem, known as CUDA. Developers have been building and sharing AI-related tools and software libraries for over a decade on Nvidia’s proprietary platform, making it easier to build AI applications rapidly.
Many analysts have said the current limitation on Nvidia’s revenue is advanced chip-packaging capacity at semiconductor foundries—and not demand.
Last week, Morgan Stanley analyst Joseph Moore reiterated his Overweight rating for Nvidia stock, adding in a research note that the company is meeting less than half of the current demand for its AI products. He also reaffirmed his $500 price target for the shares.
Nvidia is benefiting from a “massive shift in spending towards AI and a fairly exceptional supply-demand imbalance,” he wrote. “We expect a very positive outlook, but it’s important to recognize that the exact revenue number in October [guidance] is less important than the overall trajectory” going forward.
Moore predicts Nvidia will report better-than-expected results and guidance, while providing positive commentary about its future results for the next three to four quarters. Nvidia’s top brass may reveal details on this issue during its conference call with investors.
Nvidia stock is up about 213% so far this year, while the
S&P 500
has gained 14%.
Write to Tae Kim at tae.kim@barrons.com
