Technology company Nvidia, the darling of Wall Street, reports earnings after the stock market closes on Wednesday. Investors, traders, and the common shareholder want to know what Nvidia will say and how the stock will react. The 52-week high for the stock is $974.
Over the last several days, Wall Street analysts have been talking positively about Nvidia and raising their price targets, with a few analysts having price targets at $1,200 and even above. The consensus earnings number for Nvidia for its April quarter is around $5.59 a share, with a revenue report of just under $25 billion. But the so-called “whisper” number for revenues is north of $26 billion.
As I’ve argued previously, for Nvidia’s share price to break above $1,000, set new all-time highs, and maintain positive momentum, Nvidia must report a great revenue number, above $26 billion and a related earnings beat. But that won’t be enough. Such an earnings and revenue beat is what the market expects. Nvidia must deliver more. Nvidia must provide a runway for strong earnings and revenue growth for the next several quarters so that Wall Street analysts can run their financial models and predict that Nvidia will earn more than $30 a share for Nvidia’s fiscal 2025, which begins Feb. 1, 2025.
Great numbers and guidance are already reflected in the stock price. Nvidia must also convince the market that Nvidia remains far ahead of the competition, which includes accelerated computing chips from AMD and in-house semiconductors for advanced computing designed by the technology behemoths Microsoft, Alphabet-Google, Meta, and Amazon. Competition is fierce for the semiconductors that power the data centers for artificial intelligence.
Nvidia clearly dominates the market for the graphics processing units that make AI’s large language models, or LLM, possible. Nvidia’s market share exceeds 80%. Raw power and speed are essential to build LLMs. But the AI industry is moving from LLMs to inference, learning from the models. Inference does not require as much speed as building LLMs. Nvidia wants to convince Wall Street that it is also far ahead in inference.
Clearly, Nvidia must jump multiple hurdles to beat already high expectations, provide multiple quarters of positive guidance, and convince The Street that the flight path for the future is clear of turbulence. Still, Nvidia should deliver on all metrics. On May 10, Taiwan Semiconductor said that its business was much better than expected, largely because of demand for Nvidia chips.
Nvidia has already announced a new product cycle. In the fourth calendar quarter of this year, Nvidia will begin delivering to customers its Blackwell semiconductor chip systems. Blackwell will offer quantum improvements from Nvidia’s current accelerated computing technology. Moreover, Nvidia is rapidly integrating software into its semiconductor designs. Nvidia is creating an integrated hardware and software offering with the goal of locking customers into Nvidia’s systems in which customers can create both LLMs and learn, infer, from those systems.
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Nvidia is building an ecosystem.
The future does look bright. But Wall Street can be fickle. Short-term investing is a random walk. My advice is to invest in Nvidia and ignore the noise. Nvidia invests heavily in R&D. It is far ahead of its competition. It is building a deep, wide protective moat around its intellectual property and raising all barriers to market entry. Nvidia should be a great investment for many years. So, invest and ride the Nvidia profit stream.
Note: The writer owns shares in Nvidia.
James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes a daily note.