Nvidia earnings will be major test for AI demand, market rally
By Chavi Mehta
(Reuters) -Nvidia investors expect the chip designer to forecast quarterly revenue above estimates when it reports results on Wednesday. Their only question is, by how much?
The company has been the biggest beneficiary of the rise of ChatGPT and other generative artificial intelligence apps, virtually all of which are powered by its graphics processors.
Nvidia (NASDAQ:NVDA) shares have tripled in value this year, adding more than $700 billion to the company's market valuation and making it the first trillion-dollar chip firm. They were up more than 3% on Monday.
The blistering rally in its shares means that Nvidia has little room for any earnings-related disappointment and anything other than a higher-than-expected forecast could trigger a rout in its stock, some analysts have warned.
The results could also dictate the direction of the wider market this week, as most of the S&P 500's gains this year have come from the AI-driven rally in Nvidia and Big Tech stocks.
«I've been covering tech since 1994 and I have never seen an environment where you are so dependent on one company to deliver,» said Inge Heydorn, partner at GP Bullhound, which owns both Nvidia and AMD shares.
«AI is really the last pillar of growth and everybody is depending on it. If Nvidia shows weakness, we could be in for quite a substantial correction in the market.»
Wall Street expects the chip company to guide for a rise of about 110% in third-quarter revenue to $12.50 billion, according to Refinitiv. Nvidia has only forecast revenue below estimates once in the past two years.
Citi analysts said last week they were only modeling a revenue forecast of around $12 billion, but buy-side expectations have gone up to $14 billion.
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