Key Takeaways
- Nvidia is scheduled to report earnings next week, and analysts are expecting the chipmaker to top expectations again.
- Jefferies and Wedbush analysts have each recently said that increasing spending from big tech companies should lead to Nvidia beating estimates and raising its outlook.
- The results come as markets stumbled this week amid growing concern about how long AI spending will continue to grow.
Nvidia (NVDA) is set to report its latest earnings after the market closes next Wednesday, and analysts are expecting big things.
Analysts from Jefferies and Wedbush have each said in recent notes that they expect the artificial intelligence giant to “beat and raise,” or report better financial metrics than analysts have projected and lift their future forecasts.
“Hyperscale capex spending results for Q3 generally exceeded expectations,” Wedbush analysts wrote, maintaining their $210 price target. “More importantly, the large hyperscalers nearly ubiquitously talked to an expectation of increasing spending trends into future periods as they continue to expand investment to support their AI efforts.”
Nvidia shares closed nearly 2% higher on Friday at around $190. The stock has gained 42% since the start of the year, far outpacing the gains of the benchmark S&P 500 index.
Why This Matters to You
Nvidia is the most valuable company on the market today, meaning its stock likely has an outsized impact on your portfolio, and potentially your retirement. The chipmaker’s performance in quarterly earnings can affect the stock prices of a range of companies involved in the AI sector.
The Wedbush analysts said that much of the growth in spending from “hyperscalers” such as Microsoft (MSFT), Alphabet (GOOGL) and Amazon (AMZN) seems to end up being funneled to Nvidia, as the chipmaker “supplies a disproportionate amount of the AI server value.”
However, some investors and analysts are starting to question how much the biggest tech companies should be willing to spend before they see a clearer path to getting a return on their investment into AI. Meanwhile, many market participants have been looking for signs of a bubble.
Bank of America analysts, keeping their price target at $275, said they expect Nvidia executives to reassure investors about their ability to meet demand, and said the company is facing high earnings expectations and growing skepticism around AI spending.
Nvidia is expected to report adjusted earnings per share of $1.26 on revenue of $55.28 billion, each up more than 55% from the same time a year ago, according to estimates compiled by Visible Alpha. Data center revenue, the chips Nvidia sells that other companies buy to train and run a variety of AI models, is expected to grow 61% and make up $49.53 billion of Nvidia’s revenue.
Oppenheimer analysts lifted their price target for Nvidia earlier this week, calling the chipmaker the single company that is “best positioned to win” in the AI sector.
