All eyes are on Nvidia, the bellwether for the AI industry, as analysts and investors hope the chipmaker’s third-quarter earnings assuage concerns about whether the high-flying valuations of AI firms have peaked.
A great deal will ride on how confident Nvidia chief executive Jensen Huang appears in his forward-looking guidance. Analysts and experts say that although they are largely confident Nvidia will beat Wall Street expectations, they’re anxiously awaiting news on the status of industry demand for the firm’s AI chips.
“There is still no doubt that Nvidia is far and away the leader for AI-focused chips,” David Meier, senior analyst at investment website the Motley Fool, wrote. “So, I expect revenue, margins, and cash flows to be pretty close to analysts’ estimates. But 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.”
Shares in Nvidia have been down 7.9% in November after major investors dumped their stocks in the firm. Peter Thiel’s hedge fund, Thiel Macro, sold off its entire stake in the chipmaker in the last quarter. His holdings would have been valued at about $100m, according to a Reuters report. Softbank has also sold off its $5.8bn holdings in the company, further boosting fears of an AI bubble.
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“I do not believe that Nvidia’s growth is sustainable long-term,” said Forrester’s senior analyst Alvin Nguyen. “AI demand is unprecedented, but if there is a market correction due to supply meeting demand or a slowdown in the pace of innovation/businesses getting used to the pace, I expect that the continued growth in Nvidia share value will slow down.”
The company is expected to report $1.26 in earnings per share on $54.9bn in overall revenues and $49bn in data-center sales. That’s a 56% jump in year-over-year overall revenues.
Wall Street is also expecting the company to project $62.2bn in revenue for the fourth quarter of the year. Earnings that fall short of any of these numbers may lead to a tepid market reaction. Last quarter, the company beat most of Wall Street’s expectations except for data center sales prompting a 2.3% drop in after-hours trading.