Nvidia (NVDA) will report its highly anticipated third quarter earnings after the bell on Wednesday, its first such announcement since the company’s market capitalization briefly eclipsed $5 trillion last month.
The earnings reveal comes as Wall Street grows increasingly anxious over the state of the AI trade, with investors and analysts flagging bubble concerns amid high valuations. Nvidia’s stock was down nearly 3% on Tuesday, and shares have lost some 12% since its latest all-time high.
Even as other tech behemoths have reported strong earnings, the chip giant is the most important bellwether for the AI trade. Any miss or beat on projections set to impact price action on a wide array of AI stocks. The report could also trigger a $320 billion swing in the chipmaker’s market value, according to data from analytics firm Option Research & Technology Services (ORATS). That would be the largest post-earnings move ever for Nvidia.
According to Deepwater Asset Management managing partner Gene Munster, a beat and raise scenario may not necessarily be a good thing for the broader AI trade.
“The cross currents … set up a Catch-22 for the AI complex, because stronger guidance can amplify worries about overspending, while a modest raise can be read as the first sign that growth is normalizing faster than expected,” he wrote in a note to investors.
The report comes after Peter Thiel’s hedge fund sold off its entire roughly $100 million stake in Nvidia. SoftBank Group (SFTBY) also unloaded all of its Nvidia stock, valued at $5.8 billion, as the company seeks to fund its own enormous AI bets.
It also follows remarks from Advanced Micro Devices (AMD) CEO Lisa Su during the company’s Financial Analyst Day, during which she said that she believes the data center market will be worth as much as $1 trillion by 2030.
Read more: Live coverage of corporate earnings
Nvidia CEO Jensen Huang speaks on how AI infrastructure and AI factories that generate intelligence at scale are powering a new industrial revolution at the Washington Convention Center on Oct. 28. (AP Photo/Manuel Balce Ceneta) · ASSOCIATED PRESS
Going into Nvidia’s earnings, investors will be on the lookout for how much of the company’s revenue continues to come from hyperscalers like Amazon (AMZN), Google (GOOG, GOOGL), and Microsoft (MSFT). The chip designer regularly points out that roughly 50% of its data center revenue comes from those companies, and as competition heats up with AMD and cloud players tout their own AI processors, that reliance could become a liability.
But the AI trade also gained a major detractor last week in investor Michael Burry, who famously shorted the housing market ahead of the 2008 financial crisis. In a post on X, Burry claimed that companies, including Meta (META) and Oracle (ORCL), are artificially boosting their earnings results by understating the depreciation of data center equipment.
For Q3, analysts are anticipating adjusted earnings per share (EPS) of $1.26 on revenue of $55.2 billion, according to Bloomberg consensus data. That would represent increases of 55% and 57% increase versus the $0.81 EPS and $35.1 billion the company reported in the same period last year.
Of that $55.2 billion, $49.3 billion is expected to come from Nvidia’s data center business. Gaming is projected to bring in $4.4 billion.
Gross margins should decline 1.84% to 73.62% versus the 75% the company saw in Q3 last year.
Nvidia has said it isn’t modeling any revenue from China. There was hope that the company would be able to begin shipping its chips into the world’s second-largest economy as part of a US-China trade deal.
But there has been no movement on that front despite President Trump and Chinese President Xi Jinping holding a high-profile meeting in South Korea in late October.
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Email Daniel Howley at [email protected]. Follow him on Twitter at @DanielHowley.
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