Benzinga - by Shanthi Rexaline, Benzinga Editor.
AI stalwart Nvidia Corp. (NASDAQ:NVDA) is all set to release its first-quarter earnings report on Wednesday after the market close, and all eyes are trained on the report, given its implication for the market.
Key Nvidia Numbers: Expectations ahead of the report are lofty, and investors are losing sleep over the company’s ability to meet them.
The consensus expectations vis-à-vis past performances are as follows:
| Consensus | Q1’24 | Estimated Y-o-Y Growth | Q4’24 | Estimated Q-o-Q Growth | Guidance | |
| Revenue | $24.65B | $6.52B | +341% | $22.10B | +11.54% | $24B +/- 2% |
| Non-GAAP EPS | $5.59 | 98 cents | +470% | $5.16 | +8.33% | N/A |
| Non-GAAP gross margin |
N/A | 66.8% | – | 76.7% | – | 77% +/- 50 basis points |
Deepwater Asset Management’s Gene Munster flagged a potential “Osborne effect” hurting near-term results, including that of the first quarter. The impending launch of Blackwell, Nvidia's new flagship GPU platform, this fall creates a risk for the April, July and even October quarters as customers hold back on purchases in anticipation of the new AI accelerators, he said.
Any disappointment may trigger an initial negative reaction but investors could stick with the stock, realizing “today's pain is for next quarter’s gain,” the venture capitalist said.
Morgan Stanley’s Joseph Moore, however, called for a strong quarter and guidance, as he sees steady growth even as supply and demand shift to Blackwell.
Lumida Wealth‘s Ram Ahluwalia expects another beat-and-raise quarter. Return on capex spend is sharply higher for hyper scalers and therefore they will continue to spend, while countries like Saudi Arabia are spending heavily on data centers, he said. TSMC’s 60% revenue growth for April has a positive readthrough for Nvidia, he added.
Ahead of the report, an analyst equated Nvidia’s earnings report to a Taylor Swift concert. Paul Marino, chief revenue officer at GraniteShares, said, “The anticipation of Nvidia earnings is like that of a Taylor Swift concert lately. Estimates are high and expectations to beat estimates are even higher.”
Positives And Pushbacks: Marino flagged a leading indicator that bodes well for earnings. “The largest and most important tech companies reported capex spending in AI in the tens of billions. Nvidia chips are the most widely used in the AI race,” he noted. Also, rivals, including Advanced Micro Devices, Inc. (NASDAQ:AMD) are yet to capitalize on the massive spending in a meaningful way, he said.
On the flip side, Marino noted increased competition from Amazon, Inc. (NASDAQ:AMZN) and Alphabet, Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG), which are producing in-house AI chips, and AMD’s MI300. He also sees supply chain issues faced by Nvidia’s supplier TSMC and restrictions on AI chip exports to China as deterrents.
For Nvidia investors, the focus is not whether it is a beat or miss but “how big is the beat and how confident is Jensen Huang on future growth,” Marino said.
Market Impact: Louis Navellier, founder and chief investment officer of Navellier & Associates, told Benzinga a weak or in-line earnings may generate a market sell-off, especially due to the sharp run-up seen so far in May. “But a weakish or flat market before the report, like we had three months ago, would suggest a large move to the upside on good earnings, while a further surge in the broad market into the report makes any market move more suspect,” he said.
Look Ahead: Despite the uneasiness over Nvidia’s near-term, Munster is bullish long-term. “The AI build is still just starting, and Nvidia will grow faster for longer,” he said. Wall Street currently models July quarter non-GAAP earnings of $5.95 per share and revenue of $26.66 billion.
Rosenblatt’s Hans Mosesmann raised the specter of Nvidia losing unit market share to custom ASICs, AMD's MI300X, and even Gaudi 3 from Intel Corp. (NASDAQ:INTC). But from the sales and value perspective, Nvidia is likely to maintain or even increase its market share due to a focus on platform and software stack, he said.
The company’s strategic shift towards software-centric service vectors, such as Omniverse, digital twins, and AI foundry a transformation in Nvidia’s business model, expected to be significantly more software intellectual property-based. Consequently, the company is poised to extract more value throughout the entire stack, indicating a growth potential.
Price Action: Nvidia stock is up 92.62% year-to-date, outperforming major ETFs such as the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust (NASDAQ:QQQ), and the iShares Semiconductor ETF (NASDAQ:SOXX). This follows a 240% surge in 2023.
The stock, though, is trading off its all-time high of $974 hit on March 8.
In premarket trading, the stock eased 0.52% to $948.90. according to Benzinga Pro data.
Read Next: NVIDIA Q1 Earnings Preview: Analysts Anticipate Strong Results, Top AI Stock — ‘Best Secular Idea In All Of Technology’
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