When looking at NVIDIA's earnings report, what should we focus on? According to Morgan Stanley, the earnings guidance and B100 are key factors to consider.

Investor frenzy over AI has propelled NVIDIA's market value to surpass both Amazon and Alphabet-C, making it the third largest company in the US stock market. After the US stock market closed on February 21, NVIDIA is set to announce its Q4 2024 financial performance amid much anticipation.

On February 18, Morgan Stanley analyst Joseph Moore and team released a report stating that there is no sign of cooling demand for NVIDIA chips. It is expected that NVIDIA's Q4 financial report will continue to demonstrate strong profitability, likely exceeding market expectations once again. Benefiting from the emergence of the B100 and a clear business layout, revenue guidance is expected to remain optimistic:

We believe that NVIDIA's revenue for Q4 of the 2024 fiscal year and Q1 of the 2025 fiscal year will exceed expectations by $1 billion, reaching $21.5 billion and $23 billion, respectively.

Despite the increasingly fierce competition in the AI inference market, NVIDIA is still able to expand its revenue. It is expected that the most critical data center business revenue will reach $88 billion in 2024, higher than the previous estimate of $80 billion and the $46.7 billion revenue in 2023.

Strong demand will continue to drive up NVIDIA's stock price

Morgan Stanley bluntly stated in the report that NVIDIA's financial report could be a volatility event affecting the US stock market trends. However, they remain optimistic about NVIDIA's financial report. If Q4 revenue exceeds consensus and the future revenue guidance is optimistic, there is still a 5-15% upside potential for the stock price:

We believe that NVIDIA's chip supply still faces bottlenecks, but the strong demand for AI chips cannot be denied. While cloud service providers are still looking for alternatives to NVIDIA's H100 and B100, such as AMD's MI300 and Intel's Gaudi 2, competition is intensifying, and there are some bearish factors for NVIDIA. However, at present, NVIDIA is undoubtedly the king in this chip war.

Morgan Stanley believes that NVIDIA's future business is also promising, with the B100 expected to be a game-changer in artificial intelligence, even more powerful than the previous flagship AI chip, the H100.

A month later, on March 18, NVIDIA will host the 2024 Graphics Technology Conference (GTC) for AI developers. NVIDIA CEO Jensen Huang will deliver a keynote speech, potentially revealing more details about the B100.

Vivek Arya, an analyst at a US bank who has always been bullish on NVIDIA, believes that the pricing of the upcoming B100 from NVIDIA will be at least 10% to 30% higher than the H100 system.Morgan Stanley still maintains a target price of $750 for NVIDIA's long-term trend. The technology sector is far from experiencing a bubble, but no company's stock will "vertically rise" forever. It is normal for NVIDIA to experience a pullback in the future, which will be an opportunity for investors to position themselves strategically rather than chasing the peak stock price:

"We believe that the earnings expectations for AI-related stocks will continue to rise, demonstrating greater resilience. Even in the face of an economic slowdown, businesses still need to invest in artificial intelligence technology. Therefore, if investors do not seize the AI wave, they may miss out on profit opportunities."

From statistical data, in the past 8 earnings reports, NVIDIA has shown outstanding revenue and earnings per share in 7 of them. Arm, AMD, and other companies in the artificial intelligence ecosystem have all indicated that there is no sign of a slowdown in chip demand.

However, it is worth noting that the current bullish options market is heavily betting on AI stocks like NVIDIA, showing signs of significant Gamma Squeeze. The put-to-call ratio is at the lower end of the historical range, with implied volatility rising and tilting towards the call side. Once NVIDIA announces its earnings report, the overall implied volatility of the options market may decrease, leading to a drop in the prices of NVIDIA-related call options.

Therefore, some believe that the market's enthusiasm for NVIDIA should return to rationality. Excessive expectations may indicate that NVIDIA may not be able to meet them. Arya suggests that the "blind pursuit of AI by investors this year" may cause NVIDIA's stock price to drop by over 10% after the earnings report is released.