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Nvidia is expected to report on Wednesday that its quarterly sales more than doubled, despite slowing year-over-year growth, as Wall Street braces for one of the world's most-watched earnings reports.
Analysts expect the US chipmaker to report revenue of $28.7 billion for the quarter, up more than 100% from the same period last year, but that would still be a significant slowdown from the previous quarter, when revenue grew by a staggering 262%, buoyed by insatiable demand for the company's chips that are driving a wave of AI innovation.
Investors will be particularly interested to see how much delays to the next generation of Blackwell chips could derail the company's incredible growth story.
Nvidia has quickly become a bellwether for investors watching for signs that the months-long AI spending boom may be slowing, which could lead to volatility around the announcement from a stock that has driven more than a quarter of the S&P 500's gains this year.
There are signs that some investors are bracing for broader repercussions from Wednesday's announcement. Options markets last week were expecting the S&P 500 to move 1.3% in the first day of trading after Nvidia reports its earnings, according to Citi data, a level of expected volatility on par with next month's Federal Reserve meeting. Options markets were pricing Nvidia shares to move as much as 10% either up or down.
Nvidia shares are up more than 160% this year, but they've been volatile in recent weeks as investors reassess their AI-related bets. Information technology and consumer discretionary stocks (which include tech giants Amazon and Tesla) were the two worst-performing sectors in the S&P 500 index in the third quarter. At its low point during the recent market sell-off, Nvidia was 35% below its all-time high. By last Friday, the company had recouped most of its losses but was still 8% below its all-time high.
“I think we're seeing a real shift and calm around some of the extreme AI investments,” said Dec Mullarkey, managing director at SLC Management. “If AI investments disappoint in any way, that could lead to some pretty significant corrections and ripple effects.”
Despite these concerns, the AI investment frenzy from Google, Microsoft, Meta, Amazon and others shows little sign of slowing, leading many analysts to expect another strong quarter for Nvidia.
But there are some potential hurdles: The launch of Nvidia's next-generation GPU, Blackwell, has been delayed due to manufacturing issues with partner TSMC. Nvidia CEO Jensen Huang said in the company's last earnings call in May that he expects Blackwell to contribute “significantly” to revenue this year.
Citi analysts said last week that investors are focusing on demand for Nvidia's current generation of Hopper chips, which could offset the impact of Blackwell's delays.
HSBC analysts say the delays to Blackwell's chips pose no “material downside” risk to the company's revenue in 2025 and 2026. They're also bullish on the company's future performance, predicting revenue will beat expectations again, reaching $30 billion.
Earnings from the big tech companies in the race for AI supremacy offer a glimpse into the spending surge that Nvidia is benefiting from. In its July quarterly earnings, Google reported another jump in capital expenditures, hitting $13 billion in the quarter that ended in June, in part reflecting Nvidia's continued spending on chips. Meta, Microsoft and Amazon similarly reported they plan to continue spending heavily on AI.
The continued focus on spending with little guidance on when that would translate into profit or productivity gains spooked some investors who were already concerned that shares of big tech companies were overvalued.
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Spending by a small group of big tech AI “hyperscalers” accounts for nearly half of revenue from Nvidia's data center business, which is fast becoming the company's main source of income.
“The big concern that everybody has is the delays at Blackwell,” Dan Hutchison of TechInsights told the Financial Times. “The other factor is when people start looking at the world and saying, 'Can[hyperscalers]monetize this?' Because at some point they're going to have to streamline what they're doing.”
“My sense is that NVIDIA investors will stay the course, especially with the economy doing well and business rates expected to decline at a macro level,” Hutchison added.
