Nvidia Corp. will report another stunning set of results on Wednesday, but Wall Street is increasingly expecting this from the chip giant.
Perhaps that's why Nvidia stock NVDA was headed for its worst day in over a year at the start of the report. Shares were down 6.2% on Tuesday afternoon and are on track for their biggest one-day percentage decline since Dec. 27, 2022, when they lost 7.1%.
Nvidia was on track to lose $112 billion in market capitalization that day, which would mark the largest daily market capitalization loss in its history, according to Dow Jones Market Data – with the decline being double the $56 billion decline -dollar on May 31st. 2023.
The one-day decline is also likely to exceed the full market value of other major chip companies, including Micron Technology Inc. MU ($88 billion) and Analog Devices Inc. ADI ($93 billion).
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“Given the year-to-date rally in Nvidia's share price… we believe overall market expectations have increased significantly as consensus earnings now approach our forecasts,” wrote HSBC analyst Frank Lee. Nvidia shares are up more than 35% so far this year.
Lee and his team “see limited scope for further earnings growth in 2024 compared to the sales and earnings surprise in 2023.”
Analysts tracked by FactSet expect Nvidia to have adjusted earnings of $4.59 a share on revenue of $20.4 billion in its fiscal fourth quarter ended January. Adjusted earnings per share are expected to rise more than 400%, while revenue could more than triple.
The company is forecast to produce similarly impressive numbers for the current quarter: analysts are forecasting adjusted earnings per share of $5.02, up more than 350%, and revenue of $22.2 billion. which is approximately three times the previous year's value.
The setup for Nvidia looks “challenging” because the bar is “so high,” according to Mizuho analyst Jordan Klein. “A potential downward move in the stock feels much bigger than an upward move,” he continued, although he also said he wouldn't provide guidance for the quarter because it was likely “a mistake” with Nvidia.
Harsh Kumar, an analyst at Piper Sandler, noted that he expects the company to forecast data center revenue of $400 million to $500 million above the consensus estimate, which would represent about 10% sequential growth.
“However, if this result holds true, we expect the stock to remain flat given the recent rise over the past two months and extremely high expectations heading into the release,” he wrote.
See also: Three AI “enabler” stocks to consider as Nvidia prepares for another possible surprise
Of interest will be Nvidia's view of the Chinese market, as the company faces Commerce Department restrictions on sales to the country but is working to modify products so they can continue to be sold there.
“Importantly, the guidance will most likely not include revenue from newly developed chips for China,” Kumar wrote. “We expect this revenue stream to potentially pick up again in the April quarter following reports late last year that a new export control compliant chip was in the works.”
Morgan Stanley's Joseph Moore pointed out that some expect Nvidia's forecast could call for quarterly revenue of more than $25 billion, but “although it's possible that revenue will get there,” he and his see Team the company
lead more conservatively, at least initially
Moore doesn't predict an “immediate strong reaction” to an upbeat Nvidia report, although he also doubts the stock will sell off.
“Most of our investor conversations are with clients who are positive about the stock but are concerned that near-term expectations are too high, which usually leads to a favorable situation,” he wrote.
Read: Nvidia is expected to be the best performer in the S&P 500 by 2025
Raymond James' Srini Pajjuri commented that any “near-term decline” in Nvidia shares would likely be “short-lived.”
He is optimistic about the company's upcoming B100 product, which could see a “quick time to market,” noting that “the computing power required for AI shows no signs of slowing down.”
Overall, he expects Amazon.com Inc. AMZN to emerge as a “key near-term driver” after Meta Platforms Inc. META and Microsoft Corp. MSFT have been large customers in recent quarters.