Tomorrow's earnings report, Nvidia's stock price hit a record high, up 245% this year

Highlight the point

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  On Monday, local time in the United States, Nvidia shares closed up 2.3%, hitting a record high, closing at $504 per share.

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  Nvidia will report its fiscal third-quarter earnings on Tuesday local time, and analysts expect its revenue to increase by more than 170%.

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  While Nvidia doesn't typically provide guidance for the next fiscal year, demand will be closely watched in 2024.

Tencent Technology News reported on November 21 that on Monday, local time in the United States, the share price of chip giant Nvidia closed up 2.3%, a record high, and the price per share exceeded $504. The company will report its fiscal third-quarter earnings on Wednesday, Beijing time, and analysts expect its revenue to rise by more than 170%.

What's even more shocking is that, according to LSEG's estimates, Nvidia's revenue forecast for the fiscal fourth quarter is likely to be higher, with an increase of nearly 200%. With the Thanksgiving holiday just around the corner, Wall Street will be keeping a close eye on the core company that has sparked this year's AI boom.

Nvidia's stock price has surged by 245% cumulatively in 2023, far outpacing any other S&P 500 constituent. Its current market capitalization is $1.2 trillion, much higher than Facebook's parent company Meta or Tesla.

Any indication that the enthusiasm for creative AI is cooling during the earnings call, or that some big customers are switching to AMD processors, or that export ban restrictions are adversely affecting the business, could spell problems for the stock that has been on the rise.

Bank of America analysts wrote in a note last week: "Market expectations are high for Nvidia to release its fiscal third-quarter earnings on Nov. 21. They have a "buy" rating on the stock and said they "expect to raise their price target."

However, they pointed to export restrictions and concerns about competition as two issues that attracted investors' attention. In particular, AMD's entry into the generative AI market has given new impetus to Nvidia, which essentially dominates the AI graphics processing unit (GPU) market.

AMD CEO Lisa Su said late last month that the company expects GPU revenue to be around $400 million in the fourth quarter and more than $2 billion by 2024. The company said in June that its state-of-the-art AI GPU, the MI300X, would begin shipping to select customers this year.

So far, Nvidia is still the market leader in the field of AI GPUs, but the high price tag is a problem. "Nvidia needs to forcefully refute the claim that its product is too expensive for generative AI inference," Bank of America analysts wrote. ”

Last week, Nvidia unveiled the H200 GPU, a GPU designed to train and deploy the various AI models that are driving the explosion of generative AI, enabling businesses to develop smarter chatbots and transform simple text into creative graphic designs.

The new GPU is an upgraded version of Nvidia's H100 chip, which is used by OpenAI to train its state-of-the-art large language model, GPT-4 Turbo. Raymond James estimates that the H100 chip costs between $25,000 and $40,000, requiring thousands of chips to work together in a process known as "training" to train the largest model.

The H100 chip is part of Nvidia's data center group, whose revenue in the fiscal second quarter surged 171% to $10.32 billion, accounting for about three-quarters of Nvidia's total revenue.

Analysts expect Nvidia's data center revenue to nearly triple to $13.02 billion in the fiscal third quarter from $3.83 billion in the same period last year, according to FactSet data. Analysts surveyed by LSEG (formerly Refinitiv) estimate that Nvidia's total revenue in the fiscal third quarter is expected to rise 172% to $16.2 billion.

LSEG expects Nvidia's revenue growth to peak at about 195% in the fiscal fourth quarter. Its expansion will continue to be strong throughout 2024, but is expected to decelerate with each quarter.

Nvidia executives are expected to answer questions related to OpenAI's massive personnel changes on the earnings call. OpenAI is the creator of the chatbot ChatGPT, which is the main catalyst for Nvidia's growth this year. On Friday, OpenAI's board abruptly announced the dismissal of its chief executive, Sam Altman, due to a dispute over the pace of product development and the direction of focus for the company's development.

OpenAI is a big buyer of Nvidia's GPUs, as is Microsoft, the biggest supporter of OpenAI. After a chaotic weekend, OpenAI said on Sunday night that former Twitch CEO Emmett Shear will lead the company on an interim basis. Soon after, Microsoft CEO Satya Nadella said Altman and ousted OpenAI chairman Greg Brockman would join to lead the newly formed advanced AI research team.

So far, investors at Nvidia don't seem too worried about the export ban, despite the potential for significant implications for the company's business. The H100 and A100 AI chips were the first targets of new U.S. restrictions aimed at restricting sales to China last year. Nvidia said in September 2022 that the U.S. government would still allow it to develop H100 in China, which accounts for 20% to 25% of its data center business.

Nvidia has reportedly found a way to both continue selling to the world's second-largest economy while still complying with U.S. regulations. According to sources, the company will deliver three new H100-based chips to the Chinese manufacturer.

Historically, Nvidia has avoided providing annual guidance, preferring to look only at the next quarter. But given the amount of money investors have poured into the company this year and the lack of news available for them to follow up this week, they will be keeping a close eye on CEO Jensen Huang's remarks on the conference call for any signs of whether the generative AI boom is fading. (Text/Golden Deer)