Nvidia stock slumped Tuesday ahead of its hotly anticipated earnings report due this week, as the top investor pick for artificial intelligence grapples with sky-high expectations.
Nvidia CEO Jensen Huang addresses a crowd in March.
Nvidia’s share price slipped about 1% to below $940 by mid-morning Tuesday, still within 1% its highest-ever close of $950 per share set in March, with the slump likely resulting from repositioning ahead of its earnings report slated for Wednesday afternoon.
Options trades indicate the market expects Nvidia’s stock to move about 8.5% in either direction following its Wednesday report, according to Bank of America.
That’s a move which would add or knock off some $200 billion from Nvidia’s $2.3 trillion market capitalization, a hard-to-grasp sum for a company valued at $200 billion total just four years ago.
Nvidia investors’ moods this week will likely depend on the company’s ability to deliver on the stratospheric forecasts for its first full quarter of 2024, as Wall Street anticipates Nvidia to expand revenue by 240% to $24.6 billion and net income by 540% to $13.1 billion, according to year-over-year consensus analyst projections compiled by FactSet.
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“Expectations aren’t exactly low,” remarked Raymond James analyst Srini Pajjuri in a note to clients, summarizing the massive bar facing Nvidia this week.
Pajjuri is among the host of analysts who believe Nvidia’s stock still has plenty of room to grow. That’s even after Nvidia shares exploded by more than 500% over the last 18 months as investors grew infatuated with Nvidia’s nearly unprecedented earnings growth for a company of its size, all the while maintaining ludicrously high profit margins. Nvidia is the clearest benefactor of the recent explosion in generative AI, as it creates the graphics processing units required by machine learning applications, cornering about 80% of the AI semiconductor chip market.
Nvidia is expected to account for roughly 40% of all earnings growth across the S&P 500 in the first quarter of the year, according to Bank of America. Put another way, the benchmark American stock index’s projected bottom line growth would fall from 5.7% to 3.2% without Nvidia, according to FactSet.