AI Boom Faces Major Test: Can NVIDIA's Financial Report Boost Stock Price?

On Wednesday, August 23rd, after the US stock market closed, NVIDIA is set to release its latest financial report. Market expectations for NVIDIA's Q2 revenue are around $11.07 billion, representing a year-on-year growth of 65%. Earnings per share are anticipated to be $2.07, reflecting a year-on-year increase of 306%. Currently, Wall Street's average target price for NVIDIA exceeds $520, indicating a potential upside of over 10%.

After the US stock market closes on August 23, NVIDIA will release its financial report for Q2 of the fiscal year 2024 (ending July 31, a three-month period). Market expectations indicate that NVIDIA's revenue will reach $11.07 billion, a year-on-year growth of 65%, and earnings per share (EPS) will be $2.07, a year-on-year increase of 306%.

As the biggest beneficiary of the AI boom, there are two key points to focus on in this financial report: the growth of the data center business and the company's guidance for the next quarter.

NVIDIA's data center business, which includes chips for artificial intelligence, accounts for 56% of the company's total revenue and is its largest source of income.

Currently, demand for NVIDIA's high-end GPU products exceeds supply. It is estimated that NVIDIA is expected to sell approximately 550,000 high-end AI GPUs H100 worth billions of dollars this year. Additionally, the price of NVIDIA's A100 has already increased by over 40% this year, and the overall price increase will also be an important driver of NVIDIA's performance growth this quarter.

However, according to media reports, the surge in demand has led to supply shortages for NVIDIA, and the delivery cycle for the crucial H100 chip has been delayed by six to nine months. Uncertainty remains regarding the growth of the data center business in the second quarter and the second half of the year due to export restrictions in the United States.

The performance guidance is also a major point of interest. In the previous quarter, NVIDIA estimated that its Q2 revenue would exceed $11 billion, a year-on-year increase of over 50%. The better-than-expected performance guidance resulted in a 24% surge in NVIDIA's stock price after the financial report was released.

Based on historical performance, NVIDIA's performance guidance has been highly accurate, and actual performance has often exceeded expectations. Therefore, we anticipate that this financial report will meet or slightly exceed expectations.

【Source：MOOMOO】

Recent Wall Street institutions have expressed optimism about NVIDIA, with the average target price for NVIDIA continuously increasing. The current target price for NVIDIA is $537.9, indicating a potential upside of at least 15%.

【Source：TradingView】

Wells Fargo has raised its target stock price for NVIDIA from $450 to $500, while UBS strongly recommends holding NVIDIA ahead of the earnings report. Morgan Stanley has also expressed a similarly positive outlook, stating that NVIDIA remains their top pick.

We have compiled the target prices of major institutions as follows:

【Table: Compiled by Mitrade】

Analysts have extremely high expectations for NVIDIA's earnings report, and failure to meet these targets could have a severe impact on the tech sector.

So, will this earnings report be favorable for the stock price?

We believe that if the earnings report meets or slightly exceeds expectations, it will be beneficial for NVIDIA's stock price, but the potential increase will be limited (not exceeding 5%). Since the last quarter's earnings report, NVIDIA's stock price has already risen by over 55%, and most of the anticipated performance has been realized. Additionally, with constrained production capacity, it may be challenging for NVIDIA to achieve another significant revenue growth in the future.

Currently, NVIDIA's stock price has broken above the 21-day moving average, indicating a clear buy signal, with a short-term potential to retest the previous high of 480.

【Source：TradingView】