Key Points
- Nvidia is likely to report over 112% year-over-year revenue growth.
- Nvidia’s stock has surged over 150% this year but faces investor scrutiny.
- Potential delays in Blackwell AI chips could impact future growth.
- Despite U.S. restrictions, Nvidia’s strategies in China are under close watch.
Nvidia is expected to report a more than doubling of its second-quarter revenue on Wednesday, fueled by its dominance in AI chips. However, with its stock already up over 150% this year, investors are eager for Nvidia to surpass Wall Street’s expectations, as any deviation could impact the ongoing AI rally.
Nvidia’s stock, which has significantly boosted the S&P 500 index, is currently valued at around 37 times its forward earnings, higher than the average of 29 for the top tech companies. The company’s powerful graphics processing units (GPUs) have become essential for tech giants like Microsoft, who are investing heavily in AI infrastructure.
According to LSEG data, for the May-July period, Nvidia is anticipated to report a 112% year-over-year increase in revenue to $28.68 billion. However, its adjusted gross margin might have dipped by over three percentage points to 75.8% due to increased production costs to meet surging demand.
Nvidia’s role as a benchmark in both the chip and AI industries has attracted significant attention, but there are concerns about its ability to sustain its growth. Investor anxiety, particularly regarding the pace of AI spending by Nvidia’s top customers, led to a 20% decline in the company’s stock during July and early August. Although the stock has since recovered, it remains 5% below its June record high.
Further challenges loom, with potential production delays for Nvidia’s next-generation Blackwell AI chips. While CEO Jensen Huang previously indicated these chips would ship in the second quarter, design issues could push back the timeline, potentially impacting revenue growth in early 2024. Additionally, possible fee increases from chip contractor TSMC could further pressure Nvidia’s margins.
Despite these hurdles, Nvidia is expected to forecast a 75% rise in third-quarter revenue to $31.69 billion. However, this would mark the end of its five-quarter streak of triple-digit growth, reflecting tougher year-over-year comparisons.
To mitigate delays in Blackwell chips, Nvidia may substitute orders with its previous generation Hopper chips, which, while less powerful, are still suitable for many AI applications. Investors will also look for updates on Nvidia’s AI processors for the Chinese market, where U.S. government restrictions have limited sales of its most advanced chips. Meanwhile, U.S. regulators are investigating potential antitrust concerns related to Nvidia’s business practices.
