Nvidia Earnings Preview: NVDA produces new all-time high before selling off

Nvidia traded above $481 on Tuesday, up 20% in a little over a week.
NVDA has broken the $480.88 all-time high from July 14.
Nvidia CEO Jensen Huang will unveil Q2 earnings after market close on Wednesday.
Q2 revenue is expected to jump 65% YoY due to heavy demand for AI-focused chips.

Nvidia (NVDA), the leading global designer of GPUs and chips specifically used in generative AI systems, has seen its share price break to a new all-time high on Tuesday. The market is anticipating a significant beat-and-raise announcement at Wednesday’s post-market earnings call.

The NASDAQ Composite has gained significantly as well, up 0.7% at the open, while NVDA stock initially traded above $481 a share before edging lower. The previous all-time high from July 14 was $480.88.

Nvidia stock earnings

You can’t really blame the retail crowd for this one. Nvidia is being helped along by extremely bullish price target revisions from some of the leading lights on Wall Street.

On Monday, HSBC analyst Franke Lee raised his price target on NVDA stock from $600 to $780. Lee’s view is that there is plenty of likelihood that the earnings outlook for next year will rise substantially from here, giving Nvidia a much lower forward price multiple. Nvidia’s rally this spring began when management hiked its outlook on Q2 revenues by $4 billion, so there is some precedent to that idea.

KeyBanc analyst John Vinh also raised his price target to $620, writing that Nvidia has a near monopoly on chips used for AI capabilities and that its CUDA software platform has given it a particularly competitive perch.

The average price target on Wall Street is $487.56. Twenty-four analysts have given Nvidia stock a Buy rating, six give it a Strong Buy, and only three have given it a Hold rating.

All 33 Wall Street analysts covering Nvidia have revised their Q2 earnings forecast higher over the past quarter. The consensus for adjusted earnings per share (EPS) is now $2.09. The sales consensus for the quarter is $11.07 billion, slightly higher than Nvidia’s surprising outlook for $11 billion during the Q1 earnings call back in May.

Despite already trading up more than 200% year to date, excitement for this chip designer keeps growing. Demand for its leading-edge chips used in large artificial intelligence platforms and systems has raised the hype behind the share price. At least four mega-cap Chinese firms have each stockpiled more than $1 billion worth of Nvidia chips this year, and it was recently reported that Saudi Arabia and Dubai also had state firms that were stockpiling Nvidia’s H100 and A100 chips for their own AI-related endeavors.

Nvidia FAQs

What is Nvidia known for?

Nvidia is the leading fabless designer of graphics processing units or GPUs. These sophisticated devices allow computers to better process graphics for display interfaces by accelerating computer memory and RAM. This is especially true in the world of video games, where Nvidia graphics cards became a mainstay of the industry. Additionally, Nvidia is well-known as the creator of its CUDA API that allows developers to create software for a number of industries using its parallel computing platform. Nvidia chips are leading products in the data center, supercomputing and artificial intelligence industries. The company is also viewed as one of the inventors of the system-on-a-chip design.

What is the history of Nvidia?

Current CEO Jensen Huang founded Nvidia with Chris Malachowsky and Curtis Priem in 1993. All three founders were semiconductor engineers, who had previously worked at AMD, Sun Microsystems, IBM and Hewlett-Packard. The team set out to build more proficient GPUs than currently existed in the market and largely succeeded by late 1990s. The company was founded with $40,000 but secured $20 million in funding from Sequoia Capital venture fund early on. Nvidia went public in 1999 under the ticker NVDA. Nvidia became a leading designer of chips to the data center, PC, automotive and mobile markets through its close relationship with Taiwan Semiconductor.

What is Nvidia’s relationship to artificial intelligence?

In 2022, Nvidia released its ninth-generation data center GPU called the H100. This GPU is specifically designed with the needs of artificial intelligence applications in mind. For instance, OpenAI’s ChatGPT and GPT-4 large language models (LLMs) rely on the H100’s high efficiency in parallel processing to execute a high number of commands quickly. The chip is said to speed up networks by six times Nvidia’s previous A100 chip and is based on the new Hopper architecture. The H100 chip contains 80 billion transistors. Nvidia’s market cap reached $1 trillion in May 2023 largely on the promise of its H100 chip becoming the “picks and shovels” of the coming AI revolution.

Why does Jensen Huang have a cult following?

Long-time CEO Jense Huang has a cult following in Silicon Valley and on Wall Street due to his strict loyalty and determination to build Nvidia into one of the world’s leading companies. Nvidia neary fell apart on several occasions, but each time Huang bet everything on a new technology that turned out to be the ticket to the company’s success. Huang is seen as a visionary in Silicon Valley, and his company is at the forefront of most major breakthroughs in computer processing. Huang is known for his enthusiastic keynote addresses at annual Nvidia GTC conferences, as well as his love of black leather jackets and Denny’s, the fast food chain where the company was founded.

Nvidia stock forecast

Nvidia stock did calm down somewhat following the open, but expect it to overtake the July 14 high once again. Bulls are chomping at the bit, and the recent price action demonstrates that the market expects a major beat.

Support sits at $420, $400 and the $373 to $378 demand zone from June. The Relative Strength Index (RSI) reading near 60 demonstrates that NVDA is far from overbought, even at this elevated price level. A major beat late Wednesday could easily lead NVDA into the $500s.

NVDA daily chart

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