Nvidia Stock Clears Hurdle Ahead of Earnings: Can It Sustain Momentum?

Nvidia Corporation (NVDA) stock has surged ahead of its highly anticipated earnings report next week, clearing a significant hurdle and reaching new heights. The company's shares have been on a roll, gaining 24% on Thursday following an impressive earnings and guidance release. This article explores the factors driving Nvidia's recent success and examines whether the stock can maintain its momentum.



Nvidia reported a first-quarter profit of $1.09 per share, surpassing analysts' expectations of 92 cents. The company also offered second-quarter revenue guidance of $11 billion, nearly $4 billion more than the $7.15 billion consensus estimate. This strong performance was driven by robust demand for chips capable of handling artificial intelligence (AI) workloads.



The company's chief financial officer, Colette Kress, attributed the demand surge to generative AI, which is creating opportunities and broad-based global growth across various markets. Analysts, such as Christopher Rolland from Susquehanna, are optimistic about Nvidia's growth prospects. Rolland believes that Nvidia's four segments—auto, data center, gaming, and professional visualization—could grow at a rate at least three times that of the semiconductor industry generally.



Nvidia's recent gains have brought the company closer to becoming the world's first trillion-dollar chip stock. With a market capitalization of $939.3 billion, Nvidia is just $60.7 billion away from reaching the $1 trillion mark. However, it is essential to consider whether the stock can sustain its momentum and maintain its lofty valuation.

While Nvidia's earnings and guidance have been impressive, the stock is not without risks. Despite Thursday's gains, the stock is still cheaper based on estimates than it was the day before. At 47.4 times 12-month forward earnings, the stock is not inexpensive. Nvidia's ability to live up to these high expectations depends on the sustainability of AI-related demand from various industries.

Moreover, history shows that not all trillion-dollar stocks have been able to maintain their valuations. Of the six U.S. companies that have reached this milestone, only Apple, Amazon, Alphabet, and Microsoft have been able to reclaim the trillion-dollar threshold after initially falling. Meta and Tesla, with market caps of $666 billion and $601 billion, respectively, have yet to reattain that level.

In conclusion, Nvidia's stock has cleared a significant hurdle ahead of its earnings report, driven by strong demand for AI-related products. While the company's growth prospects are promising, investors should remain cautious and consider the risks associated with maintaining such a high valuation. As Nvidia approaches the trillion-dollar mark, it will be crucial to monitor the company's performance and the sustainability of AI-related demand to determine if the stock can continue its upward trajectory.