It's been called “the most important tech company performance in years.” Whether or not tech bull Dan Ives was exaggerating, there's no doubt that, in his words, “the popcorn is ready.” Wall Street is expecting another strong quarter from one of the world's leading semiconductor stocks, and Wednesday's results could help rally stocks across the industry. Or, if the company fails to live up to expectations, shares will crash.
Multiple industry analysts told Fortune that NVIDIA's earnings are a referendum on both AI investment and the semiconductor industry because of the company's dominant position in producing advanced graphic processing units (GPUs), which are at the heart of the AI boom. They added that NVIDIA's rapid growth will inevitably slow (250%+ year-over-year growth can't last forever!). A variety of risks loom over the next few years, from competitive to macroeconomic to geopolitical, but the upswing should continue, at least for now.
“The bottom line is they're shipping as much product as they can make to their customers, primarily Microsoft, (Amazon Web Services) and Meta,” said Ted Mortenson, managing director and strategist for the technology desk at Baird. “They're poised for another incredible quarter.”
The next wave of AI has quickly made NVIDIA one of the most powerful companies in the world. Revenues last quarter increased 262% to more than $26 billion, beating expectations by more than $1 billion, up from just over $7 billion in the same period last year. The company is now the second-largest company in the United States by market capitalization, and its market cap has increased by nearly $2 trillion over the past year to just over $3.1 trillion.
This has resulted in huge gains for investors: The company's shares have risen more than 166% so far this year and were trading above $128 as of Tuesday's close. Investors who have held the stock over the past five years have seen the stock rise by roughly 3,000%, nearly doubling their investment year over year.
The company's broader impact on the overall market has also been astounding: As big technology companies powered the S&P 500 to record highs in the first half of the year, Nvidia accounted for nearly 30% of the index's total return during that period.
But from a revenue perspective, Nvidia will soon inevitably become a victim of its own success, as even Wall Street's AI darling faces the law of large numbers.
“These comparisons are biblical,” Mortenson said. “I've never seen a company outperform expectations more in the past year. This isn't Nvidia's fault; they're just facing some very tough comparisons.”
But the slowdown is already partially priced into stock prices, according to Angelo Gino, senior vice president and tech equity analyst at CFRA Research.
“If you look at the valuation of this company, it's trading significantly below what it's actually traded at historically,” he said.
In its last earnings report, Nvidia projected revenue of $28 billion, more than double last year's figure, and the market is expecting the company to beat its own guidance by more than $800 million.
Whether the company meets these projections will be seen by many as a barometer for AI investment and the state of the semiconductor industry as a whole. Zino noted that Nvidia's H100 GPUs are eventually set to be replaced by the next-generation Blackwell product line, and given their dominance, they're essentially an indicator of demand across the AI sector.
“NVIDIA is kind of recognized as the center of the world when it comes to AI deals,” he said.
Fortunately for chipmakers, tech giants feel compelled to invest in AI like, in Mortenson's words, “drunken sailors,” and he and Gino don't expect the phenomenon to slow down much over the next 12 months. Nvidia has more orders than it can fulfill, and semiconductor companies like Micron, Marvell and Broadcom also stand to benefit.
“The bottom line is that what's good for Nvidia is also good for many other chipmakers that sell into the data center space,” Zino said.
As if there weren't already enough reasons for investors to take notice.
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