Nvidia Corporation’s remarkable market advancement has sparked uncertainty even among optimistic investors regarding whether surpassing earnings expectations will suffice to drive up the shares of the AI chipmaker.
The pivotal question at present, not only for Nvidia but for the broader market as well, revolves around the company’s ability to meet revenue projections and provide assurance to investors regarding its vision for continued growth in generative artificial intelligence. Goldman Sachs Group Inc.’s trading desk has labeled Nvidia as “the most important stock on planet earth,” underscoring its significant impact on equity market gains this year.
Kim Forrest, chief investment officer of Bokeh Capital Partners LLC, emphasized Nvidia’s influential role in setting the market tone, stating, “Nvidia has been the driver, the one stock that really set the tone.” The anticipation surrounding Nvidia’s upcoming performance underscores the fascination with its potential to deliver another set of impressive financial results.
Despite a recent downward trend with Nvidia shares declining by as much as 4.1% on Wednesday for the fourth consecutive day, the company maintains a substantial market capitalization of approximately $1.7 trillion. Positioned as the third-largest component in the S&P 500, following Microsoft Corp. and Apple Inc., Nvidia’s stock movement significantly impacts investors by adding or erasing billions in market value.
In the year 2024, Nvidia’s stock has surged by about 35%, marking the highest gain on the S&P 500 Index thus far. This growth trajectory builds upon last year’s remarkable 239% increase, propelling Nvidia’s market value by over $400 billion in the current year alone.
Analysts on Wall Street anticipate another exceptional quarter for Nvidia, with revenue projections exceeding $20 billion, reflecting a nearly 240% surge from the previous year and marking the third consecutive period of triple-digit percentage growth. Nvidia is scheduled to report its earnings after the market closes on Wednesday.
Despite the positive outlook, historical responses to Nvidia’s previous earnings announcements have been mixed, with shares experiencing fluctuations post-earnings releases. However, analysts remain optimistic about Nvidia’s leadership in AI, anticipating further upward momentum irrespective of the immediate market response to earnings announcements.
With a majority of analysts expressing bullish sentiment towards Nvidia, the stock currently holds 60 buy ratings, five holds, and one sell, according to Bloomberg data. The average 12-month price target stands at approximately $734, suggesting a potential 8% increase.
While analysts at Piper Sandler foresee a modest revenue and earnings beat for Nvidia along with promising guidance for data-center revenue, they acknowledge the possibility of a muted market reaction given the stock’s recent momentum and high expectations leading into the earnings report.
In light of the elevated expectations, some investors are prepared to capitalize on any potential post-earnings dips in Nvidia’s stock price, viewing such moments as strategic opportunities to invest in AI for the long term. Despite the significant stock appreciation over the past year, Nvidia’s valuation remains relatively attractive, trading at around 32 times forward earnings compared to approximately 25 for the Nasdaq 100 index.
As Nvidia prepares to unveil its earnings results, the market awaits to see whether the company can sustain its growth trajectory and uphold its position as a key player in the AI landscape.
