NVDA Stocktwits: Nvidia Braces for Critical Challenge on Wall Street Amidst ‘Parabolic’ Stock Surge.

NVDA Stocktwits: KEY POINTS

Nvidia will announce its financial results for the fourth quarter on Wednesday evening.

This will be the first quarterly earnings report since Nvidia’s market value exceeded that of Alphabet and Amazon.

According to a report from Bank of America analysts on Thursday, the rise in NVDA’s stock price has been exponential.

Nvidia, the world’s third most valuable public company, is set to announce its fiscal fourth-quarter earnings after the market closes on Wednesday. With investors offering little room for error, the company’s performance will be closely scrutinized.

Nvidia’s shares have experienced a remarkable surge, increasing by a factor of five since the conclusion of 2022. This remarkable growth can be attributed to the soaring demand for their graphics processing units, which play a pivotal role in the ongoing artificial intelligence revolution. AI developers heavily rely on Nvidia’s advanced chips, including the H100, to craft state-of-the-art models like the ones utilized by OpenAI in the development of ChatGPT.

Last week, the company’s market capitalization reached approximately $1.8 trillion, surpassing Alphabet and Amazon, and now ranking behind only Microsoft and Apple.

Bank of America analysts stated in a recent report that NVDA’s stock has seen exponential growth. They maintained their buy rating and suggested that the surge in NVDA’s stock could be attributed to a combination of fear, greed, and a rush by investors to capitalize on AI-related investments.

The quarterly results of other major tech companies were released weeks ago, shifting the focus to Nvidia.

Analysts are forecasting a remarkable 240% surge in revenue to $20.6 billion for the period ending Jan. 28, as per LSEG, previously known as Refinitiv. With each new dollar of sales, the company is managing to extract even higher profits.

Net income is anticipated to skyrocket to $10.5 billion from $1.41 billion a year ago. Nvidia’s gross margin in the third quarter rose to 74% from 53.6% in the previous year.

Significant growth is predicted in Nvidia’s data center business, particularly with its AI chips. FactSet reports analysts are expecting nearly a fourfold increase in revenue to $17.06 billion on an annual basis.

Investors will be paying close attention to Nvidia CEO Jensen Huang’s remarks to gauge the sustainability of these impressive growth rates. The company has already seen a 200% year-over-year growth in the third quarter, and analysts are projecting a similar rate of expansion in the first quarter of this year.

One potential concern arises from the fact that a significant portion of Nvidia’s GPU sales are being made to major tech companies like Microsoft, Amazon, Meta, and Google. The worry is that these companies may decide to reduce their spending on AI hardware if they do not observe the desired benefits.

In a recent note, D.A. Davidson analyst Gil Luria highlighted that all four companies have expressed plans to substantially increase their investment in AI infrastructure this year. This positive development is expected to have a favorable impact on NVDA’s fourth-quarter results and 2024 Q1 guidance. Luria, who maintains a neutral rating on the stock with a $410 price target, expressed optimism in this regard.

However, Luria also cautioned that the long-term demand outlook from Nvidia’s top customers may be more uncertain. The companies have described their purchasing as “flexible” and “demand-driven,” indicating that they could scale it down if the current hype cycle subsides. While Luria believes that we have not reached that point yet, he acknowledges the possibility of early signs indicating a shift in demand.

Nvidia’s gaming division, previously the company’s main focus, is projected to experience a more moderate growth rate of 49% and generate $2.72 billion in revenue. It is worth noting that some of Nvidia’s gaming cards are utilized by small businesses and researchers for artificial intelligence purposes.

According to Thomas O’Malley from Barclays, analyzing the report will be relatively straightforward. The crucial metric to consider will be the number of GPUs in data centers, along with commentary on the broader market adoption. O’Malley, who holds a neutral rating on the shares, emphasized the significance of sustaining the current run-rate in data centers, which is approaching $100 billion annually.

Other analysts are closely monitoring Nvidia’s ability to meet short-term demand due to concerns about chip supply, as the company relies on Taiwan Semiconductor Manufacturing Company. Additionally, there is growing anticipation surrounding Nvidia’s upcoming high-end AI chip, the B100, which is set to be shipped this year.

In a recent report, Melius Research analyst Ben Reitzes expressed enthusiasm about Nvidia’s plans to launch the B100 in 2024 and the X100 in 2025. Reitzes, who recommends buying the stock, believes that the Total Cost of Ownership benefits for data center operators, similar to the upgrade from the A100 to the H100, will drive growth in 2025.