Nvidia’s stellar earnings streak to continue, with AI spending still booming, Wedbush says

• Nvidia is expected to have a strong quarter on the back of continued AI spending, Wedbush says.

• Tech firms are still early in investing in AI hardware, driving demand for Nvidia’s AI chips.

• Major customers such as Foxconn and Supermicro are reporting profits from AI, boosting Nvidia’s prospects.

According to Wedbush Securities, Nvidia is bound to report another strong quarter of earnings as the AI ​​spending boom is in full swing.

The investment firm — which has called Nvidia founder Jensen Huang the “Godfather of Artificial Intelligence” — said it was still bullish on the chipmaker ahead of its second-quarter earnings report on Aug. 28. The $1 trillion “wave” of artificial intelligence spending that Wedbush previously estimated is underway, with tech firms still in the early stages of investing in AI hardware, according to Matt Bryson, senior vice president of equity research of Wedbush.

“What’s fueling it is that there’s still a lot of spending on the AI ​​chips that Nvidia makes,” Bryson said in an interview with CNBC on Monday, noting that the recent selloff in Nvidia stock stemmed from concerns that demand for the company’s stock is decreasing. AI chips and that there could be issues with Blackwell, its next-generation GPU.

But some of Nvidia’s biggest customers reported healthy profits, thanks in part to increased investment in AI. Foxconn, a major buyer of Nvidia chips, saw its profits rise 6% in the latest quarter, largely due to “strong growth momentum” stemming from its AI servers. Supermicro, another big Nvidia customer, also posted “strong” sales and beat revenue estimates last quarter, despite not posting any revenue, Bryson noted.

“The recovery has to do with a lot of recent data suggesting that AI spending just isn’t slowing down,” he added.

The integration of AI into personal devices could also be a major tailwind for the semiconductor industry as it will fuel greater demand for AI content, Bryson predicted.

Also, Nvidia delaying the release of the Blackwell chips probably “doesn’t matter” in the grand scheme of things, he added, assuming the company is on track to release the chip from now on.

“Everyone is committed to spending on AI with the launch of Blackwell. So you got another year of increased spending on AI,” Bryson said. “I still have a ‘buy’ rating and I think we get another quarter from Nvidia, which again is another beat and a plus.” They did it consistently. There just doesn’t seem to be any change in momentum from their customer base.”

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Some analysts have grown skeptical of Nvidia’s wild success, with the stock soaring 3,021% over the past five years as more tech firms have rushed into the AI ​​space.

Some analysts, however, have argued that demand for Nvidia’s chips will decline. Some of Nvidia’s biggest customers, such as Meta, Alphabet and Amazon, are already working on their own chips or investing in other partners, according to an analyst who predicted a long-term decline in the stock.

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