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✅ Key idea:
Key takeaways
- Nvidia is scheduled to report earnings next week, and analysts expect the chip maker to beat expectations again.
- Jefferies and Wedbush analysts recently said that increased spending from big tech companies should lead to Nvidia beating estimates and raising its outlook.
- These results come as markets falter this week amid growing concern about how long spending on artificial intelligence will continue to grow.
Nvidia (NVDA) is set to report its latest earnings after the market close next Wednesday, and analysts are expecting big things.
Both analysts from Jefferies and Wedbush said in recent notes that they expect the AI giant to “outperform and rise,” or report better financial metrics than analysts expected and raise their future forecasts.
“Q3 high-capex results generally exceeded expectations,” Wedbush analysts wrote, maintaining a price target of $210. “More importantly, large hyperscalers have almost everywhere spoken out about anticipating increased spending trends in future periods as they continue to expand investment to support their AI efforts.”
Nvidia shares closed about 2% higher on Friday at around $190. The stock is up 42% since the beginning of the year, far outpacing the gains of the benchmark S&P 500 Index.
Why is this important to you?
Nvidia is the most valuable company on the market today, which means its stock will likely have a big impact on your investment portfolio, and potentially your retirement. The chip manufacturer’s performance in quarterly earnings could impact the share prices of a range of companies operating in the artificial intelligence sector.
Much of the growth in spending from “super-scalers” like Microsoft (MSFT), Alphabet (GOOGL) and Amazon (AMZN) appears to have ultimately been shifted to Nvidia, as the chipmaker “provides a disproportionate amount of AI server value,” Wedbush analysts said.
However, some investors and analysts are beginning to wonder how much big tech companies will have to be willing to spend before they see a clearer path to getting a return on their AI investments. Meanwhile, many market participants were looking for signs of a bubble.
Bank of America analysts, who kept their price target at $275, said they expect Nvidia executives to reassure investors about their ability to meet demand, and said the company faces high earnings expectations and growing doubts about spending on artificial intelligence.
Nvidia is expected to report adjusted earnings per share of $1.26 on revenue of $55.28 billion, up more than 55% from the same time last year, according to estimates compiled by Visible Alpha. Revenue from data centers, which are chips that Nvidia sells and that other companies buy to train and run a variety of AI models, is expected to grow 61% and make up $49.53 billion of Nvidia’s revenue.
Oppenheimer analysts raised their price target for Nvidia earlier this week, describing the chipmaker as the one company “better positioned to win” in the artificial intelligence sector.
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