Nvidia's Earnings Report Looms as AI Sector's Make-or-Break Moment

Nvidia's highly anticipated earnings report is set to be released post-market on August 28, Eastern Time. Being the leading AI computing powerhouse, Nvidia's performance is often considered a bellwether for the broader AI and tech sectors. The upcoming earnings announcement is expected to be one of the most critical for any tech stock in recent memory, often likened to the "Super Bowl" of earnings season in the United States.
Industry experts are eagerly awaiting this second-quarter report, recognizing Nvidia as a major player in AI. Investors will look to its earnings to gauge the overall health of the AI sector. Analysts predict Nvidia will report quarterly revenue of $28.668 billion, a 112% increase from the same period last year, though this growth rate is down from the previous quarter’s 262%. Data center revenue could reach $24.992 billion, growing 142% year-on-year.
Nvidia's earnings are a crucial indicator for the AI sector, especially amid recent rumors suggesting a slowdown in AI spending. As a result, the company's performance could trigger significant volatility across U.S. equities regardless of whether the results are favorable or not. The options market has priced in a 10% move for Nvidia stock post-earnings, indicating high expectations for volatility.
Year-to-date, Nvidia shares have soared over 160%, although recent weeks have seen the stock consolidate without breaking past its June highs. This fluctuating performance comes as the market reassesses some of the bets on AI. Furthermore, Nvidia's stock has previously fallen by up to 35% from its peak during recent sell-offs, settling 8% below its all-time high at last week's close.
Notably, Nvidia faces potential hurdles with the delayed launch of its next-generation GPU, the Blackwell chip, impacted by manufacturing issues at TSMC. The delay, estimated at 4 to 6 weeks, may push shipments to late January 2025. Nvidia's CEO Jensen Huang had previously mentioned that Blackwell would significantly contribute to this year's revenue. Thus, the postponement's impact will be closely scrutinized during the earnings report.
Despite these concerns, some analysts remain optimistic. HSBC analysts believe the Blackwell delay won't pose substantial downside risks to Nvidia's 2025 and 2026 earnings. Investment bank forecasts indicate another positive quarter, with some expecting Nvidia to exceed the $30 billion revenue mark.
Investors will also keep an eye on the demand for Nvidia's existing Hopper chips, which could offset any negative impact from the Blackwell delays. Recent earnings reports from major tech firms like Google, Microsoft, and Amazon show continued capital expenditure in AI, potentially benefiting Nvidia.
While concerns about overinvestment in AI exist, top executives from Google and Meta acknowledge the possibility of over-spending. However, the broader sentiment remains that investors should stay bullish on Nvidia given the favorable economic conditions and expected decreases in macroeconomic interest rates.
Thus, Nvidia's upcoming earnings report not only holds significance for its own valuation but is also seen as a pivotal factor for the broader tech and AI sectors. Investors are keenly watching how Nvidia's performance and forward guidance will shape market dynamics in the coming months.