Nvidia Earnings Report Amid Market Selloff

As the AI sector faces market turbulence, all attention turns to Nvidia, a pivotal player in the industry, which is expected to report its third-quarter earnings shortly. Analysts and investors are hopeful that these results will allay fears about whether the valuations attributed to AI firms may have reached their zenith.

A significant factor influencing this optimism is the forward-looking guidance from Nvidia’s chief executive, Jensen Huang. While there is general confidence among analysts that Nvidia will exceed Wall Street’s earnings expectations, they are particularly concerned about understanding the future demand for the company’s AI chips. David Meier, a senior analyst at the Motley Fool, noted that, “there is still no doubt that Nvidia is far and away the leader for AI-focused chips. I expect revenue, margins, and cash flows to be pretty close to analysts’ estimates. The valuable information is more likely to come from the commentary about where management sees its markets headed, whether it’s in the AI market or a new market the company is currently pursuing.”

However, the company’s stock has taken a hit, dropping 7.9% in November, influenced by significant sell-offs from major investors. Notably, Peter Thiel’s hedge fund, Thiel Macro, divested its entire stake valued at approximately $100 million, while Softbank sold off its $5.8 billion stake in the company, which has fueled concerns regarding a possible AI bubble.

Alvin Nguyen, a senior analyst at Forrester, shares caution: “I do not believe that Nvidia’s growth is sustainable long-term. AI demand is unprecedented, but if there is a market correction due to supply meeting demand or a slowdown in innovation, I expect that the continued growth in Nvidia’s share value will slow down.”

Nvidia is projected to report earnings of $1.26 per share and total revenues of $54.9 billion, with datacenter sales contributing $49 billion. This forecast indicates a remarkable 56% increase in overall revenues from the previous year. Moreover, analysts expect the company to project $62.2 billion in revenue for the fourth quarter.

Nonetheless, should Nvidia’s earnings fall short of these projections, it may invoke a subdued reaction from the market. In the prior quarter, the company outperformed most expectations, except in datacenter sales, which resulted in a 2.3% decline in after-hours trading.