Nvidia is world’s ‘most important stock’, weighing on second-quarter profits | Wilnesh News

for NVIDIA Investors, the past two years have been a joy. But lately they’ve been on a rollercoaster ride.

A major beneficiary of the artificial intelligence boom, Nvidia’s market value has increased about ninefold since the end of 2022. Over the next seven weeks, its market value will lose about $800 billion.

Now, the stock is in the midst of a rebound, with shares up only about 7% from its all-time high.

The stock’s volatility is at the forefront of Wall Street’s mind as the chipmaker is set to report quarterly results on Wednesday. Any sign that demand for artificial intelligence is waning or that leading cloud customers are moderately tightening their belts could lead to a sharp decline in revenue.

“This is the most important stock in the world right now,” Eric Jackson of EMJ Capital said last week on CNBC’s “Closing Bell.” “If they lay eggs, it’s going to be a major problem for the entire market. I think they’re going up. It will be surprising.”

Nvidia’s report comes weeks after its big tech peers report earnings. The company’s name is all over analysts’ conference calls because Microsoft, letter, Yuan, Amazon and Tesla All of these companies have invested heavily in Nvidia’s graphics processing units (GPUs) to train AI models and run massive workloads.

Nvidia’s revenue has more than tripled in the past three quarters, with the vast majority of growth coming from its data center business.

Analysts expect a fourth consecutive quarter of triple-digit growth, but the pace will decline 112% to $28.7 billion, according to LSEG. From here, year-over-year comparisons become more difficult, with growth expected to slow over the next six quarters.

Investors will be paying particularly close attention to Nvidia’s forecast for the October quarter. The company is expected to grow about 75% to $31.7 billion. Optimistic guidance would signal that Nvidia’s deep-pocketed customers are signaling continued willingness to spend money building out artificial intelligence, while disappointing forecasts could stoke concerns that infrastructure spending is already in a bubble.

“Investors often question the sustainability of the current capex trajectory given the sharp increase in hyperscale capex over the past 18 months and the strong near-term outlook,” Goldman Sachs analysts wrote in a note last month.

The optimism in the report — the stock was up 8% in August — was largely driven by comments from top customers about how much money they will continue to spend on data centers and Nvidia-based infrastructure.

Last month, the chief executives of Google and Meta enthusiastically backed their pace of expansion, saying the risk of underinvesting was greater than overspending. Former Google CEO Eric Schmidt recently told Stanford University students in a since-deleted video that he heard from top tech companies that “they need $20 billion, $50 billion, $100 billion “processor.

But while Nvidia’s profit margins have been expanding of late, the company still faces questions about long-term return on investment, and how much return on investment customers see from buying devices that cost tens of thousands of dollars each and are ordered in bulk.

During Nvidia’s last earnings call in May, Chief Financial Officer Colette Kress provided data indicating that the cloud provider, which accounts for more than 40% of Nvidia’s revenue, would generate $5 in revenue for every $1 spent on Nvidia chips over four years.

More statistics like this may be coming soon. Last month, Goldman Sachs analysts wrote after meeting with Kress that the company would share more return on investment metrics this quarter “to instill investor confidence.”

Another major issue facing Nvidia is the timeline for its next-generation artificial intelligence chip, Blackwell. information report Earlier this month, the company faced production issues that could delay significant shipments to the first quarter of 2025.

Nvidia CEO Jensen Huang surprised investors and analysts in May when he said the company would see “significant” Blackwell revenue this fiscal year.

While Nvidia’s current generation of chips, called Hopper, remains a premium choice for deploying AI applications like ChatGPT, competition is emerging AMDGoogle and a handful of startups, which are putting pressure on Nvidia to maintain its performance leadership through a smooth upgrade cycle.

Even if Blackwell is likely to be delayed, that revenue could be pushed to a future quarter while boosting current Hopper sales, especially the newer H200 chips. The first batch of Hopper wafers will be in full production in September 2022.

“The shift in timing is not material as supply and customer demand have rapidly shifted to H200,” Morgan Stanley analysts wrote in a note this week.

Many of Nvidia’s major customers say they need the additional processing power of Blackwell chips to train more advanced next-generation artificial intelligence models. But they take what they can get.

“We expect Nvidia to de-emphasize its Blackwell B100/B200 GPU allocation in the second half of this year and instead increase its Hopper H200,” HSBC analyst Frank Lee wrote in an August report. He has a buy rating on the stock.

Correction: Colette Kress is Nvidia’s chief financial officer. An earlier version misspelled her name.