Nvidia Earnings Set to Explode the Market Again as Wall Street Celebrates Early, but Blackwell Delays Temper Optimism

Wednesday will be a significant day for investors as Nvidia is set to release its latest earnings report. As the world's leading supplier of AI hardware, the company will reveal how far AI mania soared last quarter, how fast it can continue to climb, and whether the demand for AI chips remains strong. The impact of potential delays in the new Blackwell chips will also be scrutinized, highlighting the ongoing momentum.

The market is already bracing for Nvidia's earnings and the potential volatility in overall sentiment. Options pricing indicates that traders expect Nvidia's stock to face potential volatility of up to 10% after the earnings report, the highest in three years, translating to over $300 billion in fluctuations. This is just the surface; Nvidia, the second-largest company in the S&P 500 with a 6.5% weighting, impacts major players like Microsoft, Google, Meta, and Tesla, all of which rely on its GPUs for AI advancements. Therefore, Nvidia's earnings could bring a trillion-dollar swing to U.S. stocks. No doubt, Nvidia is now one of the world's most important stocks.

Analysts predict that Nvidia's second-quarter revenue will reach $28.7 billion, a 112% year-over-year increase, with a gross margin of 75.8% and adjusted net profit of $15.9 billion, a 136% increase year-over-year. The sustained high demand for AI chips and its monopolistic position enable a rise in both volume and pricing. Additionally, the company is expected to guide third-quarter revenue to $31.7 billion, a 10% quarter-over-quarter increase and a 75% year-over-year increase, marking a return to double-digit growth after five consecutive quarters of triple-digit growth.

For Nvidia, exceeding expectations is the norm, especially with its stock price soaring 159% this year and its market value reaching $3.16 trillion. Investors are more concerned about how long this momentum can last, the executives' comments, and the supply issues of the Blackwell architecture AI chips, all of which are contributing to stock price volatility. Wall Street has mixed opinions on this.

Goldman Sachs: Blackwell Delays May Cause Volatility but Fundamentals Remain Strong

Goldman Sachs noted that Nvidia's acknowledgment of delays in the Blackwell architecture chips might cause volatility after the earnings report, but the strong fundamentals still provide upward potential. Given the rising data center revenue and strong operational leverage, both revenue and profit are expected to exceed expectations.

Analyst Toshiya Hari pointed out that demand from leading cloud service providers for Nvidia hardware remains robust, and Nvidia still holds a competitive edge in AI computing.

Despite some investors questioning whether the giants are overspending on AI, Nvidia's earnings call is expected to highlight return on investment metrics from tech enterprises, thereby boosting confidence.

The impact of the Blackwell chip delays will depend on three factors: the extent of the delay, customer demand for older Hopper chips, and the ability to ramp up production of a streamlined version of Blackwell.

Overall, Goldman Sachs maintains a Buy rating on Nvidia, with a target price of $135 per share, representing a 5% upside from the current levels.

Deutsche Bank: Valuation Reflects Fundamentals but Overall Demand Remains Solid

Analyst Ross Seymore emphasized that the stable demand for AI computing should help Nvidia deliver satisfactory results. We remain impressed by Nvidia's best-in-class technology roadmap and believe AI fervor by its customers is likely to be sustained, yielding yet another strong quarter/guide, he wrote.

Seymore noted that while product orders might decline before the official release of the Blackwell chips, the overall demand trend should remain unaffected.

However, he remains cautious, stating that the current high valuation already reflects Nvidia's fundamentals, maintaining a Neutral rating on the company.

Bank of America: Delays Are Bad News, but Any Sell-Off Is a Buying Opportunity

Unlike the more optimistic views of Goldman Sachs and Deutsche Bank, Bank of America is more cautious. The bank's analysts warned that investors are overlooking an unpriced risk: the delay in Blackwell chips could restrain post-earnings stock gains in the short term.

While Nvidia can rely on its existing Hopper chips for a longer period and introduce a streamlined version of the Blackwell AI accelerator as a temporary measure, any pushouts could further pressure Nvidia stock amidst ongoing market uncertainty around rates/geopolitics. However, we see any selloff as an enhanced buying opportunity as challenges are not in demand, but in (solvable) supply that will not fundamentally derail Nvidia's longer-term momentum, analysts wrote.

Bank of America maintains a Buy rating on Nvidia, with a target price of $150 per share, indicating a 17% upside from current levels.

Wells Fargo: Short-Term Delays Are Not a Major Concern; Current Product Lineup Is Strong

Wells Fargo expects Nvidia to deliver better-than-expected performance on Wednesday, driven by data centers and strong operational leverage. The high demand for H100 chips and the initial shipments of H200 chips are contributing to strong data center revenue. Additionally, the rapid uptake of the company's Ethernet-based networking product, Spectrum-X, will also contribute to growth.

Looking ahead to the third quarter, Wells Fargo expects Nvidia's revenue and data center revenue to grow 15% quarter-over-quarter, more optimistic than general expectations.

However, the bank also sees potential delays in the Blackwell chips as a factor that could cause short-term stock volatility. This issue is mainly expected to affect January's quarterly revenue rather than October's, as the demand for Hopper and Spectrum-X will continue to drive revenue growth in the coming months.

Citi: Nvidia Stock Poised to Hit New Highs

Citi predicts that Nvidia's comprehensive outperformance in this earnings report, coupled with optimistic guidance, will push the stock to new highs.

The bank noted that due to the Blackwell production issues, the $2 billion in excess profits Nvidia recorded over the past four quarters will decline. Despite supply chain challenges, investors may focus on the progress of H100/H200 and Spectrum-X, enterprise demand, and the risk of high-end chip sales to China.

We expect Street estimates to go higher for the Jun/Oct-Qs, Blackwell comments to reassure investors on a strong CY25 outlook, and stock to make fresh 52-week highs, Citi wrote.

Citi maintains a Buy rating on Nvidia, with a target price of $150 per share.

Wedbush: Set to Kickstart a New AI Super Cycle

Long-time Nvidia supporter Wedbush believes this will be the most critical week for the stock market this year, as Nvidia is set to accelerate the AI trend with another drop the mic performance.

Analyst Dan Ives noted that Nvidia will lead a $1 trillion AI capital expenditure over the next few years, as the company's GPUs continue to play a key role in emerging technologies. We continue to estimate for every $1 spent on an Nvidia GPU chip there is an $8-$10 multiplier across the tech sector which speaks to our firmly bullish view of tech stocks over the next year, Ives wrote.

He continues to rate Nvidia as Outperform.