Nvidia's Dow Debut: AI Chip Surge Poised to Power Record-Breaking Earnings

Nvidia's upcoming third-quarter earnings report, scheduled for release on November 20, is attracting considerable attention as it marks the company's first report since joining the Dow Jones Industrial Average. Analysts anticipate a remarkable performance, with projected revenues of $33 billion, reflecting an 83% year-over-year increase. Adjusted net income is also expected to grow by 84%, reaching $18.4 billion, with earnings per share rising by 94% to $0.72.

In the past seven quarters, Nvidia's financial results have consistently surpassed market expectations, driven largely by surging demand for AI chips. This trend continues to buoy investor sentiment, leading numerous analysts to raise their target prices for Nvidia shares. Morgan Stanley's Joseph Moore, for instance, increased his target from $150 to $160, while Mizuho's Vijay Rakesh adjusted his target from $140 to $165. UBS, Melius Research, and Piper Sandler have similarly elevated their price targets, acknowledging Nvidia's strong market position.

However, potential challenges remain on the horizon, as the supply of Nvidia's new products, especially the Blackwell line, could temper its upcoming performance and guidance. The anticipated first-quarter sales for Blackwell are expected to fall between $5 billion and $6 billion, slightly below previous forecasts. The mixed demand for Nvidia's chips—stronger for H200 but weaker for H100—also underscores varying market dynamics. Analysts predict first-quarter revenues around $36.5 billion, but caution that supply constraints might result in expectations being slightly higher than this consensus.

Nvidia's recent announcements have continued to highlight its technological leadership. At Japan's AI summit on November 13, SoftBank revealed plans to become the first recipient of Nvidia's AI server, the DGX B200, for creating a new supercomputer, the DGX SuperPOD. Moreover, SoftBank is designing another machine based on Nvidia's Grace Blackwell platform.

Investor focus has recently shifted towards the AI software sector, with significant rallies among related stocks. While AI hardware remains critical, Nvidia continues to dominate, particularly in the data center training and inference chip markets, where its market share is estimated to approach 95%. As the leader in the AI hardware domain, Nvidia's earnings report is poised to be a pivotal moment for the industry, potentially reinvigorating interest and confidence in AI chip investments.