Want to know how much value there is in Nvidia's second-quarter earnings report today? Just ask Patrick Moorhead, founder and CEO of Moor Insights & Strategy.
“Almost everything,” he told Yahoo Finance on Tuesday.
Even smaller companies in the enterprise software business that have only tenuous ties to the AI gold rush, such as ServiceNow, SAP and Adobe, are on the brink of sinking or floating, he said, citing Nvidia's report, and “the entire tech market is on the brink of rising or falling.”
Options markets are predicting that the company's gains could drive a 10% swing in Nvidia shares alone, the biggest in three years, according to data from analytics firm ORATS cited by Reuters — worth roughly $300 billion, or the combined value of Coca-Cola, Bank of America and Netflix, among the world's 35 largest companies by market capitalization.
“This is the most important stock in the world right now,” EMJ Capital's Eric Jackson acknowledged last week.
In other words, it's not just sell-side bulls like Wedbush Securities' Dan Ives who are painting today's results as a make-or-break moment for the entire tech industry.
One of the reasons so much is uncertain is the extreme pendulum swing between greed and fear we experienced earlier this month, when the worst day for the stock market since 2022 became the best day for the stock market since 2022 in less than a week.
Leading the way is Nvidia, which has helped drive the S&P 500 and Nasdaq indexes to record highs in recent weeks.
Nvidia controls about 90% of the global market for AI training and inference chips, far outstripping its competitors and making it the bellwether for the entire AI industry. Competitors big and small, whether they be Lisa Su's AMD or start-up Groq, don't have the hardware or software to challenge its dominance.
Blackwell's delays could threaten booming AI chip business
As investors become accustomed to the company's rapid growth, the biggest immediate threat to NVIDIA's stock price is actually the company itself.
The company's data center revenue has skyrocketed over the past 12 months, expanding at a compound quarterly growth rate of 52%, and is on track to reach a staggering $22.6 billion in the first quarter of 2024, up from just $4.3 billion in the first quarter of last year.
The question is how sustainable this is going to be going forward: a company like Nvidia can't keep growing its total revenue by nearly four times every single year.
That may be why CEO Jensen Huang expects a slightly slower pace in the second quarter: He sees total revenue across all business units coming in at about $28 billion, up 7.5% sequentially through the first three months of the year, and non-GAAP gross margins of 75% to 76%.
Assuming results are broadly in line with guidance, this would represent a slowdown from the 18% sequential sales growth and 78.9% gross margin reported in May.
The main potential near-term risk investors are focusing on right now is the rollout of Blackwell, a next-generation AI chip architecture that can train trillion-parameter large language models four times faster than the Hopper H100 chip, while consuming less power.
According to Nvidia, Amazon, Google, Meta, Microsoft, OpenAI and Tesla have all expressed interest in purchasing its latest B200 GPUs. Huang promised that the latest blockbuster would hit the market by the end of the year, but The Information reports that a design flaw could cause delays of up to three months.
“This Blackwell[risk]is probably the most significant 'X' factor for the quarter,” Gene Munster of Deepwater Asset Management told CNBC on Tuesday, saying he expects the company's shares, just shy of all-time highs, to see some selling after the earnings report.
The company's shares closed at $128.30 on Tuesday after hitting a high of just over $140 a share in June. A 10% increase in Tuesday's results would send the stock back to its all-time high.
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