Nvidia is poised to report its earnings later today, and investor scrutiny is particularly acute as this could impact the entire market. According to John Belton, a portfolio manager at Gabelli Funds, Nvidia is the world’s most valuable company and the largest constituent of the S&P 500. This makes its earnings report a focal point for investors, especially following the recent downturn in U.S. stocks.
Belton emphasizes that Nvidia’s earnings will provide crucial insights into the health of AI spending, stating, “Nvidia’s earnings should provide an updated view of the demand environment for AI infrastructure, which we believe remains robust, supported by a broadening set of customers using the technology across a growing number of applications.” He anticipates that the broader tech landscape will continue to thrive as AI adoption scales, suggesting that significant earnings growth for these companies is still achievable in the coming years.
As the dominant player in AI semiconductors, Nvidia’s competitive position appears strong and defensible, according to Belton. He also refutes concerns about a valuation bubble, noting that the median forward P/E multiple for what some call the “Magnificent 7” has contracted by approximately 10%, making it difficult to argue that a bubble currently exists.
In pre-market trading, Nvidia’s (NVDA) stock has shown signs of recovery after a recent decline of 14.5% since reaching its all-time high of $212.19 on October 29. The stock was up 1.7% just before the market opened, possibly buoyed by positive remarks from Wedbush analyst Dan Ives. Ives describes Nvidia as a “foundational piece” of the AI revolution and expects the company to “handily exceed Street estimates,” based on encouraging data from supply chain checks in Asia.
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New AI Regulations Risk Leaving Small Hospitals Behind, Warns Kaiser PermanenteWall Street anticipates earnings of $1.23 per share, reflecting a year-over-year increase of 51.9%, alongside revenue expectations of $54.59 billion, up 55.6% from the previous year. Investors will also be keenly observing guidance for the fourth quarter, which is expected to yield an EPS of $1.37 on revenue of $59.60 billion. Ives warns that the outcome of Nvidia’s earnings will be pivotal, particularly during a volatile period for tech stocks where fears of an “AI bubble” loom large.
Analyst Ruben Roy from Stifel has raised Nvidia’s price target from $212 to $250, citing a robust order book exceeding $500 billion for AI infrastructure. He acknowledges that while concerns around the sustainability of AI investments exist, recent industry conversations suggest that demand for AI compute resources is likely to increase.
As Nvidia prepares for its earnings release, the market remains cautious. Major investors, including Masayoshi Son of SoftBank and Peter Thiel, have recently divested their stakes in Nvidia, leading to speculation about the current momentum in AI investments. However, James Demmert, chief investment officer at Main Street Research, has suggested that this brief pullback may set a “lower bar” for Nvidia to surpass in the aftermath of its earnings report. He anticipates strong guidance and estimates that demand for Nvidia’s products remains strong, despite increased competition.
The question that hangs over the market is whether Nvidia’s earnings will serve as a harbinger of an AI bubble or substantiate the current boom in the sector. As several industry leaders raise alarms about potential overvaluation, the results from Nvidia could either confirm ongoing faith in the AI revolution or signal a need for caution.
Ultimately, as the leader in AI infrastructure, Nvidia’s upcoming earnings report may not just reflect its own performance, but also act as a bellwether for investor sentiment across the technology sector as a whole. The stakes are high, and all eyes will be on CEO Jensen Huang and the guidance he provides.
