{"id":51159,"date":"2023-08-21T12:17:24","date_gmt":"2023-08-21T16:17:24","guid":{"rendered":"https:\/\/ifintechworld.com\/uncategorized\/nvidia-earnings-will-be-major-test-for-ai-demand-market-rally\/"},"modified":"2023-08-21T12:17:30","modified_gmt":"2023-08-21T16:17:30","slug":"nvidia-earnings-will-be-major-test-for-ai-demand-market-rally","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=51159","title":{"rendered":"Nvidia earnings will be major test for AI demand, market rally"},"content":{"rendered":"
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\u00a9 Reuters. FILE PHOTO: A view of a Nvidia logo at their headquarters in Taipei, Taiwan May 31, 2023. REUTERS\/Ann Wang\/File Photo<\/span>
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By Chavi Mehta<\/p>\n

(Reuters) -Nvidia investors expect the chip designer to forecast quarterly revenue above estimates when it reports results on Wednesday. Their only question is, by how much?<\/p>\n

The company has been the biggest beneficiary of the rise of ChatGPT and other generative artificial intelligence apps, virtually all of which are powered by its graphics processors.<\/p>\n

Nvidia (NASDAQ:) shares have tripled in value this year, adding more than $700 billion to the company’s market valuation and making it the first trillion-dollar chip firm. They were up more than 3% on Monday.<\/p>\n

The blistering rally in its shares means that Nvidia has little room for any earnings-related disappointment and anything other than a higher-than-expected forecast could trigger a rout in its stock, some analysts have warned.<\/p>\n

The results could also dictate the direction of the wider market this week, as most of the ‘s gains this year have come from the AI-driven rally in Nvidia and Big Tech stocks.<\/p>\n

“I’ve been covering tech since 1994 and I have never seen an environment where you are so dependent on one company to deliver,” said Inge Heydorn, partner at GP Bullhound, which owns both Nvidia and AMD shares. <\/p>\n

“AI is really the last pillar of growth and everybody is depending on it. If Nvidia shows weakness, we could be in for quite a substantial correction in the market.” <\/p>\n

Wall Street expects the chip company to guide for a rise of about 110% in third-quarter revenue to $12.50 billion, according to Refinitiv. Nvidia has only forecast revenue below estimates once in the past two years.<\/p>\n

Citi analysts said last week they were only modeling a revenue forecast of around $12 billion, but buy-side expectations have gone up to $14 billion.<\/p>\n

At least 10 brokerages raised their price targets on the stock last week, pushing the median view to $500, which is 15.5% higher than its last close. <\/p>\n

While the company’s 12-month forward price-to-earnings ratio soared dramatically to more than 80 after its second-quarter revenue forecast of over 50% growth in May, it has come down since then as analysts raise their earnings expectations. <\/p>\n

It now trades at nearly 40 times the consensus earnings for the next 12 months, much higher than AMD’s 29.<\/p>\n

Investors will be looking at sales at Nvidia’s data center unit, home to its prized H100 chip used in AI, to see if the valuation can be justified. <\/p>\n

SUPPLY-DEMAND DIVIDE <\/p>\n

Analysts said Nvidia is able to meet only half the demand and its H100 chip is selling for double its original price of $20,000, adding the trend could go on for several quarters.<\/p>\n

Still, there are some fears about growth as some of the demand surge is coming from China, where companies are stockpiling chips over worries about more U.S. export curbs.<\/p>\n

“I don’t think the risk of losing China business is incorporated in numbers and this is also somewhat disturbing the picture,” Heydorn said.<\/p>\n

The supply-demand divide could also lead some buyers to turn to rival AMD, which is looking to challenge Nvidia’s most powerful offering for AI workloads with its M1300X chip.<\/p>\n

“AMD’s chips could be as much as 50% cheaper than Nvidia GPUs and somebody like Meta (NASDAQ:) or Google (NASDAQ:) may want to look at lowering their cost,” Piper Sandler’s Harsh Kumar said .<\/p>\n

AMD expects to start shipping the chip in the fourth quarter and could control roughly 10% of the AI chip market next year, analysts said. <\/p>\n

But they warned AMD will face an uphill battle in catching up with Nvidia’s software CUDA, which is already the industry standard in AI and has a major head start over the company’s similar offering.<\/p>\n

“Historically in semiconductors, the leader always has 70% or 80% share of the market but the customers always want to keep a second source around, so that the leader doesn’t overcharge, and that second source here is AMD,” Kumar said.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

\u00a9 Reuters. FILE PHOTO: A view of a Nvidia logo at their headquarters in Taipei, Taiwan May 31, 2023. REUTERS\/Ann Wang\/File Photo By Chavi Mehta (Reuters) -Nvidia investors expect the chip designer to forecast quarterly revenue above estimates when it reports results on Wednesday. Their only question is, by how much? The company has been […]<\/p>\n","protected":false},"author":1,"featured_media":6596,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[1],"tags":[83],"class_list":["post-51159","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-uncategorized","tag-featured","post_format-post-format-video"],"yoast_head":"\nNvidia earnings will be major test for AI demand, market rally | iFintechWorld<\/title>\n<meta name=\"description\" content=\"\u00a9 Reuters. FILE PHOTO: A view of a Nvidia logo at their headquarters in Taipei, Taiwan May 31, 2023. 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