After the dramatic fluctuations in stock price, what kind of earnings report does NVIDIA need to produce to withstand the pressure?

Tonight, "AI Pioneer" NVIDIA will stage the grand finale of the US stock earnings season. NVIDIA, carrying the "hope of the whole village," not only needs this earnings report to be "good," but it must be "very good." The revenue guidance for the future should not only be optimistic but "very optimistic."

For NVIDIA, strong profitability and revenue data significantly exceeding expectations are no longer the market's focus. The market no longer relies on indicators like P/E ratio or P/S ratio; instead, it places more importance on the company's future prospects. This means that compared to short-term financial data, the market is more concerned about the "future": the demand outlook for the H100 GPU chip, more details about the next-generation GPU chip B100, and the product roadmap planned for next year.

Bank of America analyst Vivek Arya believes that after the earnings report is released, investors' main focus on NVIDIA will be the product roadmap. This roadmap may be more clearly presented at the 2024 Graphics Technology Conference (GTC) on March 18.

Arya believes that if NVIDIA's stock price falls after the earnings report, the "future story" of NVIDIA is expected to drive the stock price up again after the March conference. The potential release of B100 could be a game-changer for artificial intelligence.

At the same time, investors will pay special attention to how NVIDIA CEO Jensen Huang views the demand for AI chips in 2024. Any indication from Huang that the AI boom may slow down could lead to a significant bearish reversal in the stock.

On Tuesday, February 20, Eastern Time, the market turmoil intensified the day before NVIDIA's earnings report, causing the stock price to drop by 4.35%, marking the largest single-day decline this year and reducing the market value by $78 billion (about 560 billion RMB), falling behind Amazon and Google.

Goldman Sachs pointed out in a report that the current bullish options bets on NVIDIA have triggered an "epic" gamma squeeze (investors heavily buying short-term call options to drive up the stock price). Currently, traders widely expect NVIDIA's earnings to exceed expectations. Therefore, for the stock price to remain stable after the earnings report, NVIDIA's performance must exceed expectations by a large margin.

Focus 1: Can NVIDIA's revenue double in the next fiscal year?

The market's median revenue expectations for this earnings report show that NVIDIA is expected to achieve revenue of $20.517 billion in Q4, a YoY increase of 239.06%; earnings per share of $4.21, a YoY increase of 637.74%.This means that in the 2024 fiscal year, NVIDIA's revenue is expected to increase by over 120% year-on-year, reaching $59.3 billion, more than double the $26.9 billion revenue in the 2023 fiscal year.

The key question in this earnings report is: Will Huang Renxun's revenue guidance convince the market that NVIDIA can achieve such significant revenue growth again in the next fiscal year ending in January 2025, doubling once more? It's worth noting that the seven tech giants (Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla) all doubled their revenue in the early stages, but none have achieved consecutive doubling for multiple years.

According to a survey of 48 analysts covering NVIDIA, 10 analysts predict that the revenue for the 2025 fiscal year will far exceed $100 billion. Data from S&P Global Market Intelligence shows that analysts generally believe NVIDIA's revenue for the 2025 fiscal year will be around $90 billion, indicating a revenue growth rate of 52%, which may not be enough to sustain NVIDIA's exciting valuation.

Cathie Wood, the star fund manager on Wall Street and CEO of Ark Investment Management, admitted in a recent media interview that NVIDIA is undoubtedly a leader in the field of AI, but the market's expectations are too high, which NVIDIA may not be able to meet. With increasing competition and challenges from inventory adjustments, she recently sold NVIDIA stocks worth about $4.5 million.

Cathie Wood emphasized that large tech companies such as Meta, Tesla, Alphabet, and Amazon are entering the chip war, which may bring pressure on NVIDIA's future demand.

Leading the way, Morgan Stanley stock analyst Joseph Moore believes that competition is unlikely to affect NVIDIA's "king" status in the chip industry:

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 gradually intensifying, and there are some bearish factors for NVIDIA. However, it appears that NVIDIA is still the undisputed king in this chip war. The rapid development and iteration of NVIDIA's chip technology mean that competitors need to surpass a very high threshold to overtake them.

Focus 2: The Future Outlook of the Data Center Business

As NVIDIA's current core business, the revenue from the data center business will be a key factor in whether NVIDIA can double its revenue. Analysts currently expect that NVIDIA's Q4 data center business is poised to achieve revenue of $17.1 billion, a year-on-year increase of 373.17%.This means that the share of this business in the company's revenue is expected to continue to expand to 83.39%, up from 80.1% in the previous quarter.

This year, the AI PC segment is getting hotter, with NVIDIA entering a second round of price hikes. Following the increase in capital expenditures in the earnings reports of major US stocks, NVIDIA continued to rise. During the Spring Festival, the emergence of Sora once again reminded the market of the demand for computing power in AI-generated videos.

Analysts believe that the overly optimistic market expectations have to some extent constrained the current performance of NVIDIA's stock price. As for the future performance trend, the market can only clearly predict the next two quarters. Long-term performance cannot be proven or confirmed.

Morgan Stanley is quite optimistic about the prospects of NVIDIA's data center business. It is expected that in the 2025 fiscal year, NVIDIA's data center revenue will reach $88 billion, higher than the previous estimate of $80 billion and the 2024 fiscal year revenue of $46.7 billion.

Goldman Sachs is also optimistic about the prospects of the data center business. Due to the continued investment of large cloud service providers in general AI infrastructure, NVIDIA's expansion into the custom AI chip field to broaden its customer base, and the launch of several new product cycles (such as H200, B100), data center revenue will continue to grow in the first half of 2025.

Therefore, Huang Renxun's views on future AI chip demand and the outlook for the data center business are crucial. Wedbush analyst Dan Ive said:

"We believe that as many companies embark on the path of artificial intelligence applications in the coming years, the peak of capital expenditure in the AI market has not yet arrived, and we expect the godfather of AI to bring more good news this week."

Focus 3: Will the next generation GPU chip B100 change the rules of AI games?

Analysts bluntly stated, "H200 shipments are imminent, and B100 is on the way," these two points will become the core of NVIDIA's future development.

B100 is the next-generation AI chip that NVIDIA is preparing to launch, with its inference speed reportedly three times faster than H100. It is expected that NVIDIA will release more new details about B100 at the Graphics Technology Conference (GTC) on March 18, 2024.

Morgan Stanley believes that B100 is crucial for NVIDIA to maintain profitability. If B100 is released as planned, it will further defend NVIDIA's dominant position in the AI hardware field and raise expectations for market participants.

Analysts at Bank of America believe that the pricing of NVIDIA B100 will be at least 10%-30% higher than H100, and demand may continue until at least the mid to late 2025. In addition, B100 will adopt a more advanced HBM high-bandwidth memory specification, expected to continue to break through in stack capacity and bandwidth, surpassing the existing 4.8TB/s.Based on NVIDIA's product roadmap, it is expected that the X100 will be launched in 2025, further enriching the GPU product lineup and consolidating NVIDIA's leading position in AI chip technology.

However, despite the excitement over the new product, investors at the earnings conference will need to understand how NVIDIA plans to address the issue of "competing with itself." With the previous 100 series chips still being delivered and now introducing even more powerful chips, how will these developments impact the company's orders and performance? The management team will need to provide the market with an answer.