Analyst revamps Nvidia’s stock price with key earnings update

Shares of Nvidia rose in trading on Friday as investors looked to the AI ​​chipmaker’s critical second fiscal quarter report and a top Wall Street analyst issued an upbeat call on its broader impact on the technology market.

Nvidia stock (NVDA) which reports for Q2 Aug. 28, has rebounded strongly from its early-month lows, adding more than $600 billion in market value since the yen-carry-trade turmoil that roiled global stocks on Aug. 5.

Stocks’ timing could be key to strengthening broader market sentiment well into the fall. Investors questioned the veracity of AI-related investment spending and weighed the impact of the first quarterly underperformance for Magnificent 7 tech stocks in at least two years.

In fact, Wedbush analyst Dan Ives says Nvidia’s earnings will highlight “potentially the most important week for the stock market in years,” given that the tech giant has “the best view and the best view for to discuss overall enterprise AI demand and appetite. for Nvidia’s AI chips look forward to it.”

Nvidia shares have added $600 billion in value since their early August lows, but face a much bigger test with next week’s fiscal second-quarter earnings report.

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With those lofty expectations in place, Ives’ colleague Wedbush analyst Matt Bryson added $18 to his price target on Nvidia, bringing it to $138 a share, while maintaining an overweight rating.

Nvidia’s Blackwell chip revenue in focus

Bryson said he sees both “stronger second-quarter results and solid third-quarter guidance” from the chipmaker next week. He expects a bottom line for the three months ended July of 67 cents a share on $30 billion in revenue.

Wall Street forecasts point to a consensus result of 64 cents per share, more than doubling (up 137%) from the year-ago period. Revenue is also estimated to have doubled to $28.55 billion.

Nvidia told investors in May that revenue for the current quarter would rise to about $28 billion. The stronger-than-expected estimate at the time eased investor concerns about delays in H100 chip orders related to the launch of its new Blackwell processors.

Related: Goldman Sachs analyst revises Nvidia stock price target ahead of earnings

Investors will focus on reports that delivery of its recently launched line of Blackwell processors, which are meant to be faster, cheaper and more efficient than its H100 Hopper predecessors, could be delayed due to design flaws.

Analysts had expected Blackwell to start contributing to Nvidia’s top-line growth in the third quarter and find its way into customers’ global data centers by the final three months of the year.

Hyperscalers ready to spend big on infrastructure

That demand, as well as Nvidia’s major market share, is expected to drive the group’s data center revenue up to $150 billion next year, largely fueled by the launch of Blackwell this year.

Hyperscalers, the leading providers of massive data centers and cloud services, are poised to spend around $500 billion over the next two years to build their massive infrastructure, according to Barclays estimates. The goal is to leverage their massive data sets to boost sales of everything from drive-through meals to the most complicated pharmaceutical tests.

However, some analysts are also beginning to question the pace of AI spending from hyperscalers like Microsoft. (MSFT) Meta Platforms (THE TARGET) Amazon (AMZN) and Google parent Alphabet (GOOGLE) and the resulting demand for high-end chips and processors manufactured by Nvidia.

Related: Big names exit Nvidia stock as AI giant stumbles ahead of earnings

Wedbush’s Ives says Nvidia’s near-term outlook will be crucial to the direction of broader tech stocks. He estimates that “for every dollar spent on an Nvidia GPU chip there is an $8-10 multiplier in the sector.”

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“The stage is set for tech stocks to rally at year-end and into 2025…as the Fed gets in a position to begin its rate-cutting cycle, the macro soft landing remains the way, and AI tech spending remains a generational spending cycle. it’s just starting to hit the shores of the tech sector,” Ives said.

Nvidia shares were marked 1.2 percent higher in premarket trading to indicate an opening price of $125.20, a move that would extend the stock’s six-month gain to about 58 percent.

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