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2024.05.20 00:55
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"US stock leader" Nvidia's earnings report next week, the market is focusing on these three points

One is the trend of profit margin, two is the ramp-up situation of Blackwell architecture chip production capacity, and three is whether the demand growth rate will slow down during the transition from GB200 to the previous generation of chips?

This week, US tech stocks continued to lead the market, with all three major indices hitting historic highs. In the past month, "super weight stocks" and "AI chip king" NVIDIA surpassed the Nasdaq with a 9.22% increase. NVIDIA is set to announce its financial report after the market closes next Wednesday, facing a crucial test in the spring rebound of the US stock market.

Wall Street analysts generally expect that in the first quarter ending in April, NVIDIA's revenue is expected to reach $24.6 billion, more than double year-on-year. By the end of January 2025 fiscal year, quarterly sales are expected to exceed $30 billion; net profit is expected to be $13.86 billion, with a year-on-year increase of over 500%.

Is it time to buy NVIDIA stock before the release of this financial report? What are the key points of this report?

Analysts believe that three points should be focused on in this report. Firstly, will NVIDIA's performance exceed expectations again, and how is the trend of profit margin? Secondly, the production capacity of the newly launched Blackwell architecture, and lastly, with the transition from GB200 to the previous generation of chips, will the demand growth rate slow down?

Market Focus on These Three Points

1. How is the trend of profit margin?

Undoubtedly, NVIDIA's performance growth and demand for its AI chips are still increasing significantly. Zacks' Earnings ESP (Expected Surprise Prediction) shows that NVIDIA's earnings may once again exceed expectations, with the most accurate estimate being earnings per share of $5.68.

It is worth noting that NVIDIA's earnings have exceeded expectations for five consecutive quarters, with an average probability of exceeding earnings expectations reaching 20.18% in the past four quarters. In terms of sales, first-quarter sales are expected to grow by 237%, with NVIDIA's sales exceeding expectations for 20 consecutive quarters.**

2. New Progress of Blackwell Series Chips

As the "leader" in AI chips, NVIDIA's market value has exceeded $1 trillion this year. Last year, the company predicted that demand for its H100 processor would double its revenue.

Subsequently, NVIDIA introduced the updated and more expensive Blackwell series chips. NVIDIA CEO Jensen Huang believes that with new challenges from major competitors such as IBM and Alibaba, the annual growth rate of the data center market will reach $250 billion, and NVIDIA will gain a larger share than other chip companies.

Wall Street will focus on the latest progress of the Blackwell series GPUs. The company stated that these GPUs will be the highest-performing AI chips on the market, surpassing the current H200 series and AMD's MI300 series.

Currently, the Blackwell series is expected to be launched in October or November, with the price of a single GPU likely to be around $30,000 to $40,000. The release of this product will solidify NVIDIA's forecast of achieving double-digit growth in the 2025 and 2026 fiscal years3. Growth in Demand for Upgrades

Additionally, a term frequently mentioned in discussions about NVIDIA recently is "air pocket," which refers to investors wanting to know whether there will be a slowdown in demand growth for NVIDIA as customers prepare for the listing of Blackwell.

BofA Securities analyst Vivek Arya warned:

NVIDIA's stock price may experience short-term fluctuations, partly due to the previous slowdown in demand for Blackwell. Despite some investors expecting sales this quarter to reach nearly $28 billion, higher than the consensus expectation of $26.5 billion, the stock price may still react unfavorably to these bullish prospects.

Jefferies analyst Blayne Curtis stated:

After the conference, we often hear concerns about the possibility of an air pocket for Blackwell, but we have not seen any signs of this. Cloud service providers are still catching up with demand, and they have a long list of customers from last year who were unable to obtain products.

We believe that the volume of GB200 NVL products will be the main driving force behind this event, as NVIDIA will once again expand their dominance into a broader range of artificial intelligence systems.

KeyBanc Capital Markets analyst John Vinh also noted that, despite expectations for the launch of a new generation Blackwell GPU in the second half of the year, signs of demand pause are limited, and NVIDIA's first quarter and second quarter performance guidance is expected to significantly exceed expectations.

Oppenheimer's Rick Schafer pointed out that the market's demand for NVIDIA chips is "insatiable," which is already very clear.

Is it Time to Buy NVIDIA Stock?

Analysts predict that due to performance growth, NVIDIA's valuation will become more reasonable. The current forward P/E ratio is 39.4 times, significantly lower than its five-year high of 122.1 times, representing a discount of around 29% compared to the median of 55.6 times.

Furthermore, NVIDIA's performance is expected to be a key driver of the current rebound in the U.S. stock market, with the S&P 500 index up more than 11.8% for the year, and over 22% since the Federal Reserve began raising rates over two years ago. The overall profit of the S&P 500 index is projected to grow by 10.4% this year and by 14.1% in 2025.

According to LSEG data, the communication services industry, including Google and Meta, and the information technology industry, including Microsoft, Apple, and NVIDIA, are expected to contribute more than half of the $494.4 billion in profits in the second quarter of the S&P 500 index