Analysts: What you need to know before Nvidia’s earnings report this week

In 1879, American paleontologist Othniel Charles Marsh used the term “Brontosaurus” to describe a subfamily of dinosaurs.

The name comes from the Greek words for “thunder lizard,” as Marsh reasoned that the earth must have thundered when such a massive creature passed by.

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While Brontosaurus encounters aren’t a problem today — outside of “Jurassic Park” — there’s an extremely rare run of companies that are so big they can make investors feel like the ground is moving beneath their feet.

Stephen Guilfoyle of TheStreet Pro noted that “very few stocks can make a significant impact on the ‘broader market’ simply by showing up.”

“At the end of the season, earnings season that is, there is only one name that can either shake or cheer the US financial markets on its own,” he said in his Aug. 26 column. “You knew from the start I was talking about the one, only, Nvidia and the CEO of that firm…Jensen ‘The Fonz’ Huang.”

Nvidia (NVDA) is scheduled to report quarterly earnings on Wednesday, and investors will focus on reports that delivery of its newly launched line of Blackwell processors, which are meant to be faster, cheaper and more efficient than its H100 Hopper predecessors, could be delayed from cause of design. defects.

Wall Street forecasts call for consensus earnings of 64 cents per share, up 137% from last year, with revenue doubling to more than $28.55 billion.

Jensen Huang, co-founder and CEO of Nvidia Corp. Photographer: Annabelle Chih/Bloomberg via Getty Images

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The analyst expresses concern about Nvidia’s performance

Shares of Nvidia fell on Aug. 5 after The Information reported that the chipmaker told Microsoft (MSFT) and an unnamed problem cloud service provider customer could maintain its production ramp and delivery dates by about three months.

Guilfoyle said there are some concerns about Nvidia’s performance, not just for the reported quarter, but for the future.

Related: Analyst Resets Nvidia Share Price Target Ahead of Earnings

Investors have been scrutinizing the levels of investment spending for the companies that have become Nvidia’s biggest customers, which he said largely cover the rest of the so-called “Magnificent Seven,” a collection of the sector’s biggest names. technological. which includes Amazon (AMZN) adze (TSLA) and Google parent Alphabet (GOOGLE) .

“Did these companies see an immediate financial benefit related to increased spending?” Guilfoyle asked. “Not really. At least not in proportion to what’s being spent. Will there be pressure to slow spending? There might be.”

“Although if this happens, the customer base will likely widen as those who are able to buy fewer tokens may have the opportunity to play catch-up,” he added, adding that even with the delay of newer, high-tech chips. the slightly older, still very high-end chips that the company can sell still sell quite quickly.”

Nvidia, which briefly overtook Microsoft to become the world’s most valuable company, beat Wall Street expectations for the first quarter in May as net income rose more than sevenfold from a year earlier to 14.88 billions of dollars.

Revenue more than tripled to $26.04 billion from $7.19 billion the previous year, as Huang proclaimed, “The next industrial revolution has begun.”

Shares were down 2.7% at $125.88 at last check. Shares are up 154% year-to-date and up 173.5% year-to-date.

Several analysts have shared their thoughts on Nvidia’s upcoming earnings report with investors.

Analyst: Nvidia’s short-term business ‘strong’

Loop Capital maintained a buy rating and $175 price target on Nvidia ahead of the company’s results this week, according to The Fly.

While the Blackwell B200 / GB200 has been delayed, it might not matter too much since the Hopper has yields from TSMC (TSM) keep getting better. The firm said in a research note that Hopper’s increased production through the fall may exceed the amount of Blackwell given up by the pushout.

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Morgan Stanley said Nvidia shares “largely allayed concerns about potential Blackwell delays — correctly,” creating a buying opportunity, as expected, as the market weighed in on those concerns.

Near-term business is strong, and the firm will continue to see Blackwell this year, according to initial guidance.

While there have been some interim Blackwell delays, Morgan Stanley said it expects management to characterize them as still in line for volume this quarter and heading into the end of the fiscal year.

The firm said the timing change did not matter much as customer supply and demand had moved quickly towards H200 and H20 demand, which remains “solid”.

Morgan Stanley has an overweight rating and said Nvidia remains a “Top Pick” in its space.

Evercore said hyperscale capital spending is one of the best indicators of demand for Nvidia systems, and it estimates it rose 20 percent from the second quarter. It notes that growth of 8% and 10% quarter-on-quarter in Q3 and Q4 is forecast.

The firm also said comments from hyperscalers — the leading providers of massive data centers and cloud services — point to evidence that AI is generating a profit.

Additionally, hyperscalers believe that the risk of underinvesting in AI today far outweighs the risk of overinvesting at this early stage of the AI ​​investment cycle.

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