Nvidia has been on a wild ride over the past two years, becoming the poster child of the artificial intelligence boom. The company’s market cap surged nearly ninefold since the end of 2022, briefly making it the world’s most valuable public company. However, after peaking in June, Nvidia experienced a sharp decline, losing nearly 30% of its value within seven weeks—a staggering $800 billion loss in market cap. Yet, the chipmaker is once again on the rise, with its stock now just 7% shy of its all-time high.
As Nvidia prepares to report its latest quarterly earnings, all eyes are on the company’s stock, which has become a focal point for Wall Street. The volatility is palpable, with any sign of weakening AI demand or a tightening budget from key cloud customers potentially leading to a significant drop in revenue. This report is particularly crucial, as Nvidia's influence extends across the tech giants—Microsoft, Alphabet, Meta, Amazon, and Tesla—all of whom heavily rely on Nvidia's GPUs to power their AI models and large-scale workloads.
In the past three quarters, Nvidia’s revenue has more than tripled, largely driven by its data center business. Analysts are expecting another quarter of triple-digit growth, albeit at a slower pace of 112%, which would bring in $28.7 billion. As the year progresses, growth comparisons will become more challenging, and analysts anticipate a slowdown over the next six quarters.
Investors are keenly interested in Nvidia’s forecast for the October quarter, where the company is expected to show around 75% growth to $31.7 billion. A positive outlook would indicate that Nvidia’s big-spending clients are still committed to the AI build-out, while a less favorable forecast might raise concerns about the sustainability of current infrastructure investments.
Much of the optimism surrounding Nvidia's upcoming report stems from the continued enthusiasm of its top customers. Recently, the CEOs of Google and Meta highlighted their aggressive investment in Nvidia-powered data centers, emphasizing that underinvesting poses a greater risk than overspending. Former Google CEO Eric Schmidt also echoed this sentiment, revealing that top tech companies are seeking billions of dollars worth of processors to support their AI ambitions.
Despite Nvidia’s expanding profit margins, questions remain about the long-term return on investment for clients purchasing high-cost devices in bulk. During Nvidia’s last earnings call, CFO Colette Kress pointed out that cloud providers, which make up over 40% of Nvidia’s revenue, could see a $5 return for every $1 spent on Nvidia chips over four years. Investors can expect more ROI metrics in the upcoming report to reinforce confidence.
Another pressing issue for Nvidia is the timeline for its next-generation AI chips, known as Blackwell. Reports suggest that production issues could delay large shipments until the first quarter of 2025, even though Nvidia maintains that production is on track for the second half of this year. This comes after Nvidia CEO Jensen Huang hinted in May that Blackwell would generate significant revenue this fiscal year. While Nvidia’s current generation of Hopper chips continues to lead the market, competition is heating up from companies like AMD, Google, and several startups, putting pressure on Nvidia to execute a smooth upgrade cycle.
Even with a potential delay in Blackwell, the impact on Nvidia’s revenue might be mitigated as demand shifts to the newer H200 chips within the Hopper line. Leading customers have expressed their need for Blackwell’s advanced processing power for next-gen AI models, but they’ll make do with what’s available for now. Analysts expect Nvidia to prioritize ramping up Hopper H200 production in the latter half of the year.
As Nvidia’s journey through the AI boom continues, the upcoming earnings report will be a critical moment. Investors and industry watchers alike will be looking for signs that Nvidia can maintain its momentum in a rapidly evolving landscape.
