Estimates for Nvidia’s fiscal first-quarter earnings have seen a notable decline over the past week. The AI chipmaker is set to release its earnings report late Wednesday, while its stock has remained relatively steady, trading within a narrow range.
According to analysts surveyed by FactSet, Nvidia is anticipated to report adjusted earnings of 73 cents per share with revenues hitting approximately $43.34 billion for the quarter ending April 27. This is a dip from a previous estimate of 88 cents per share and $43.3 billion in sales from just a week ago.
A significant factor affecting Nvidia’s earnings is a warning that the company may incur a charge of up to $5.5 billion due to H20 inventory that could not be sold to China, an outcome stemming from restrictions imposed in April. Market analysts are particularly concerned about the actual amount of this charge, as well as the guidance for sales in the fiscal second quarter. Jordan Klein from Mizuho Securities flagged concerns about potential earnings guidance for July, fearing it may disappoint investors. There are estimates suggesting Nvidia could lose between $5 billion to $8 billion in revenue per quarter due to the impact of the sales ban.
In a more positive development, it has been reported that Nvidia plans to initiate production of a new AI chip set for China as early as June. This forthcoming chip will utilize conventional GDDR7 memory as opposed to the more advanced high-bandwidth memory, but it represents an effort by Nvidia to adapt to changing market conditions.
The stock itself has shown signs of resilience, increasing by 3.3% to $135.59 during afternoon trading. Analysts note that Nvidia is currently situated in a cup-with-handle base, nearing a critical buy point of 137.40. Further potential growth could occur as it fits within a larger consolidation pattern with an upper target of 153.13.
The forthcoming earnings report is highly anticipated, serving as a key indicator for the broader AI infrastructure market. Daniel Ives from Wedbush Securities termed Nvidia as “the most important company to the markets and global investor sentiment.” He emphasized the crucial insight that this report will provide regarding Nvidia’s demand and future outlook, especially given the pressures from the H20 restrictions.
Though some analysts, such as Morgan Stanley’s Joseph Moore, express caution regarding earnings estimates based on outdated calculations, he maintains a bullish outlook on Nvidia’s stock, projecting a price target of 160. Similarly, Piper Sandler’s Harsh Kumar holds an optimistic view for the latter half of the year, foreseeing potential growth driven by increased investments in cloud computing and emerging AI initiatives.
This time of uncertainty could be seen as a pivotal moment for Nvidia, with analysts encouraging investors to remain steadfast and optimistic about the company’s long-term prospects, as they anticipate significant developments in the upcoming months.