While tech stocks have rebounded recently, large caps like Alphabet (GOOG, GOOGL), Amazon (AMZN), and Microsoft (MSFT) have seen their shares fall over the past month as investors questioned the staying power of artificial intelligence.
Shares of Google-parent Alphabet have fallen 14%, while Amazon shares are down about 8%. Microsoft shares are down more than 7% as of Thursday’s close. But Nvidia’s earnings, due later this month, could be the next big catalyst for big tech companies and AI deals overall.
Dan Howley of Yahoo Finance reports:
The chip company’s performance could turn around the AI industry more than any of the hyperscalers. Unlike those software companies, revenue isn’t an issue for Nvidia. Still, if it doesn’t live up to Wall Street’s already sky-high expectations, that could send AI trends downward.
While AI investments from Alphabet, Amazon and Microsoft may give investors pause, they’re helping to boost profits for Nvidia, whose Hopper AI chips are the most popular on the market and the company plans to start ramping up production of its Blackwell line later this year.
According to Reuters, the company controls 80% to 95% of the market for high-performance AI chips, which means that whenever a company says it’s investing in AI capabilities, that company is likely buying up, or at least using, Nvidia processors.
But Nvidia’s second-quarter report also marks the beginning of a tough period for comparing year-over-year revenue growth over the next few quarters. The company’s second-quarter fiscal 2024 revenue was $13.5 billion, up 101% year-over-year, while data center revenue was more than $10.3 billion, up 141%.
In each subsequent quarter, the semiconductor giant has seen even more impressive year-over-year growth. But this momentum won’t last forever: In its most recent quarter, Nvidia reported revenue of $26 billion, a 262% increase from the $7.19 billion the company reported a year earlier.
Wall Street analysts expect the company to report second-quarter revenue of $28.6 billion, up 112% from last year. While that would still represent a significant increase in sales, it’s not as spectacular as the growth the company has achieved in previous quarters, which may scare some investors away.
That doesn’t mean Nvidia won’t continue to make cash, or that Wall Street is discounting the company. As of Thursday, 66 analysts had recommended buying Nvidia’s stock, compared with just seven with a hold recommendation and one with a sell recommendation.
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