Nvidia (NASDAQ:NVDA) stock retreated from a record high on Wednesday ahead of its first-quarter earnings report, set for release after the bell. This report is expected to be highly significant for investors, as Nvidia has been a central player in the AI boom driving markets over the last 18 months.
Wall Street expects Nvidia to report revenue and profits that have surged more than 200% and 400%, respectively, from the prior-year period due to increased demand for its chips. Analysts predict adjusted earnings per share of $5.65 on revenue of $24.69 billion, according to Bloomberg data. In the same quarter last year, Nvidia reported adjusted EPS of $1.09 on revenue of $7.19 billion.
Nvidia’s stock has soared over 200% in the past year, closing at a record high on Tuesday. Since the market lows in October 2022, the stock has risen nearly 700%. However, shares were down around 0.4% in early trading on Wednesday.
The majority of Nvidia’s revenue is expected to come from its Data Center business, which is projected to generate $21 billion, up from $4.28 billion in Q1 last year. The Gaming division, previously the largest segment, is expected to see revenue of $3.5 billion, up from $2.24 billion in the same quarter last year.
Ahead of the earnings announcement, Stifel analyst Ruben Roy raised his price target for Nvidia’s shares to $1,085 from $910, anticipating that Nvidia will exceed expectations and raise its guidance for the next quarter.
Demand for Nvidia’s chips from major customers like Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG, NASDAQ:GOOGL), Meta (NASDAQ:META), and Microsoft (NASDAQ:MSFT) has boosted the company’s results, making Wednesday’s report a critical gauge of the industry’s appetite for further AI investment. Yahoo Finance’s Josh Schafer noted that the AI trade is expanding beyond tech, with investors eyeing energy and power companies as derivative plays on the AI boom.
However, analysts, including those from BofA Global Research and Loop Capital, express concerns about the transition from Nvidia’s current Hopper line of AI chips to its upcoming Blackwell line. There is fear that customers might delay their Hopper chip orders in anticipation of the more powerful Blackwell products. Amazon recently announced a transition to Blackwell chips for an upcoming supercomputer project after a Financial Times report suggested the company had paused some chip orders.
Loop Capital’s Ananda Baruah mentioned that Nvidia might not allow customers to delay Hopper orders without losing their place in line for Blackwell chips. If enough customers delay orders, Nvidia could see a temporary dip in quarter-over-quarter sales.
Nvidia is also facing competition from customers developing their own in-house AI chips. Amazon, Google, and Microsoft are either using or developing their own AI chips, potentially reducing Nvidia’s market share. Additionally, AMD (NASDAQ:AMD) and Intel (NASDAQ:INTC) are gaining traction with their AI chips. During its Build conference on Tuesday, Microsoft announced it would offer AMD’s MI300X chips for AI model development while continuing to use Nvidia’s chips as well.
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