Nvidia ( NVDA -1.47% ) The company’s worth is $2.6 trillion, accounting for 5.8% of the overall value. S&P 500 In June, Nvidia’s stock had increased by 150% since the beginning of the year, contributing to one-third of the total gains in the S&P 500.
Nvidia and the index have both experienced a decline in performance since mid-July. However, a significant event is approaching on Aug. 28 that has the potential to change their luck. This event is the release of Nvidia’s financial results for the second quarter of fiscal 2025, ending on July 31. Based on previous quarters, there is a possibility that the results will exceed expectations.
Nvidia creates highly potent data center chips to handle artificial intelligence (AI) tasks, and there is a high demand from leading tech companies globally that exceeds the available supply. As a result, investors are eagerly anticipating the company’s recent sales figures and speculating on how Nvidia’s stock will respond once the results are announced.
Credit: Nvidia provided the image.
Nvidia is the leading player in the market for artificial intelligence data center processors.
Nvidia’s graphic processing units (GPUs) GPUs Data centers establish the standard. AI GPUs are specifically created for parallel processing, enabling them to perform numerous tasks at the same time. They are capable of handling high data throughput and usually come with a substantial amount of integrated memory, making them well-suited for handling extensive amounts of data. This aspect is crucial for training AI creating and executing AI inference .
According to numerous predictions from financial analysts on Wall Street, the widespread implementation of AI technology has the potential to significantly increase productivity worldwide, leading to a substantial economic growth worth trillions of dollars in the next ten years. operators of data centers Many companies are transitioning from conventional CPU-based systems to GPUs to cater to the needs of AI developers. Nvidia’s top-of-the-line H100 GPU has been the preferred option since the previous year, but the company is striving to surpass its own performance standards.
The H200 from Nvidia can carry out AI inference nearly twice as fast as the H100, while using only half the energy. Additionally, there is the GB200, which utilizes Nvidia’s latest Blackwell architecture, enabling it to perform AI inference at an impressive 5 times the speed of the H100. These Blackwell-based chips are set to be widely available to customers in 2025.
Nvidia dominates the data center GPU market with a strong hold. In 2023, it was estimated to have a market share of 98%, but this is expected to decrease this year as other chip manufacturers enter the competition. AMD The demand is expected to exceed the supply for the foreseeable future.
This is what the financial market anticipates from Nvidia’s forthcoming quarterly earnings announcement.
In the first quarter of fiscal 2025, Nvidia achieved a remarkable milestone by generating an unprecedented $26 billion in revenue, marking a substantial 262% surge from the same period last year. This surpassing performance exceeded Wall Street’s expectations of $24.6 billion. Notably, a significant portion of this achievement, amounting to $22.6 billion, was attributed solely to data center revenue, showcasing an impressive 427% growth driven by the increasing demand for GPUs.
Nvidia also achieved an impressive outcome in terms of profits, earning $6.12 per share. EPS There was a significant 461% rise, surpassing the Street’s predicted value of $5.59.
Wall Street did not accurately predict Nvidia’s forecast. The company informed investors that it anticipates generating $28 billion in revenue for the second quarter, which is higher than the $26.6 billion estimated by analysts.
Analysts have been working to update their predictions, and they now anticipate that Nvidia’s revenue will reach $28.5 billion, suggesting that Nvidia’s initial forecast may have been too cautious. We will have a definite answer in a fortnight.
Nvidia’s stock may experience a significant increase due to its second-quarter performance.
Although daily stock performance is often considered random fluctuations, here is how Nvidia responded to its most recent two earnings reports:
- Nvidia announced its financial performance for the fourth quarter of fiscal year 2024 after the market closed on February 21, leading to a 16.4% increase in its stock price the next day.
- Nvidia released its financial performance for the first quarter of fiscal year 2025 after the markets closed on May 22nd, with its stock price ending 9.3% up the next day.
However, the overall pattern over an extended period is unmistakable. Nvidia’s market value stood at $360 billion at the start of 2023, just before AI fever The company has seen a remarkable increase in its stock price, with a surge of over 700% since it wowed Wall Street. Essentially, strong financial results have continuously driven the stock price higher, and I believe that the trend will continue with the upcoming Q2 earnings.
Should Nvidia surpass the sales projection of Wall Street, there is a possibility that its stock may increase by a minimum of 9% on the subsequent day, similar to what happened after the announcement of its Q1 results. The reaction could be even more favorable due to the recent decline in the stock. Nevertheless, investors are advised to concentrate on the bigger picture and the long-term outlook.
Should Nvidia achieve the projected earnings per share of $3.75 in fiscal 2026, starting in February 2025, the company’s stock would need to increase by 108% in the following 18 months in order to sustain its current position as anticipated by Wall Street. The ratio of a company’s stock price to its earnings per share is known as the price-to-earnings (P/E) ratio. of 58.2.
Indeed, the P/E ratio is considerably high compared to others. Nasdaq-100 , with a price-to-earnings ratio of 29.6, however could potentially be justified for a limited time due to Nvidia’s rapid growth.
I use the term “temporarily” because The winning streak will be over. Competition is increasing in the AI data center chips market. Like all technologies, the continuous advancement of AI will reach a point of diminishing returns, leading to reduced demand. The exact timing of this shift is uncertain, so investors should proceed with caution. Purchasing the stock without considering or researching it thoroughly. with the expectation of achieving the equal profits that Nvidia has previously provided.
