The fervor surrounding the artificial intelligence (AI) boom braces for a pivotal trial this week.
Nvidia (NASDAQ: NVDA), the emblematic chipmaker steering the generative AI revolution, is poised to unveil its fourth-quarter earnings after Wednesday’s closing bell, igniting the anticipatory gaze of Wall Street.
At the crux, Nvidia has soared by almost 400% since the onset of 2023 and has surged 46% this year, propelled by its hardware’s instrumental role in spearheading the artificial intelligence upsurge subsequent to the launch of ChatGPT. Portentously, Nvidia ascended to third place on the U.S. market ladder in terms of valuation, with a commanding market cap of $1.8 trillion, trailing behind only Microsoft and Apple, having left Amazon and Alphabet in the dust.
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The Anticipated Nvidia Performance
Exhibiting an unprecedented appetite for its GPUs, accelerators, and allied chips purpose-fit to power AI models, Nvidia has hurdled over Wall Street projections on numerous occasions, consistently proffering guidance that dwarfs consensual estimates. Consequently, Wall Street’s forecasts for Nvidia have been perpetually on an upward drift in recent months.
Upheld by such bullish momentum, analysts are forecasting a stellar 237% surge in revenue to $20.4 billion for the fourth quarter, anticipating earnings per share to vault from $0.88 to $4.56.
The lofty expectations are grounded in Nvidia’s stratospheric third-quarter revenue ascent of 206% to $18.1 billion, along with its prophesy of $20 billion in fourth-quarter revenue.
Nvidia’s Allies’ Triumphs
Furthermore, declarations of accelerating revenue growth from some of Nvidia’s affiliates serve as additional proof of the ongoing veracity of the AI boom.
Arm (NASDAQ: ARM) experienced a conspicuous spike in its shares post its earnings disclosure, underscored by the accentuated AI-centered demand. Given that Arm licenses its CPU technology to Nvidia, the propitious reviews bode well for Nvidia’s upcoming report. Likewise, Super Micro Computer (NASDAQ: SMCI) evidenced a staggering 182% surge in its stock year to date and an almost 900% upswing since the inception of 2023, propelled by preliminary results that far eclipsed expectations, bolstered by the resounding demand for their AI-capable high-density servers and storage solutions, all driven by Nvidia GPUs.
Investment Prospects Pre-Earnings
Contemplating an investment prompts consideration of a minimum one-year buy-and-hold strategy, a path replete with tax benefits and a filter for the stock market’s innate volatility. As Benjamin Graham notably quipped, “In the short run, the market is a voting machine, but in the long run, it’s a weighing machine.” The inclination toward long-term investments avails superior predictability vis-a-vis the mercurial vagaries of popular sentiment.
While the future course of Nvidia post-earnings remains indeterminate, a worthwhile acquisition should hinge on an unwavering belief in the stock’s enduring competitive advantages, fortifying its dominion in the GPU and AI chip domain, and its proactive diversification into nascent markets like PCs. The surge in Nvidia-affiliated stocks following Nvidia’s disclosed minority stakes in those companies suggests that the market may be underestimating the potential of AI hardware stocks like Nvidia.
Furthermore, the options market’s position corroborates a positive outlook on Nvidia’s impending performance, in tandem with the notion of a reinforced competitive moat in the face of burgeoning demand for AI applications, auguring a protracted upsurge in chip demand.
Revitalized by its meteoric ascent, Nvidia’s stock appears to be a sagacious long-term buy in the lead-up to its earnings report.
*Stock Advisor returns as of February 12, 2024