Nvidia stock retreats from record high ahead of crucial first quarter earnings report

Nvidia stock retreats from record high ahead of crucial first quarter earnings report

NVIDIA (NVDA) stock fell from a record high on Wednesday ahead of its first-quarter earnings report which is expected to be released after the bell. The report is expected to be one of the most important for investors this year, as Nvidia has been at the center of the AI ​​boom that has energized markets over the past 18 months.

Wall Street expects Nvidia to report revenue and earnings up more than 200% and 400%, respectively, from the year-ago period, as the company experiences a surge in demand for its chips in the context of the AI ​​boom.

Analysts expect adjusted earnings per share of $5.65 on revenue of $24.69 billion, according to Bloomberg data. The company reported adjusted EPS of $1.09 on revenue of $7.19 billion in the same quarter last year.

Nvidia stock has been on a strong rise over the past year, rising more than 200% and closing at a record high on Tuesday. The stock is up nearly 700% since the stock market lows of October 2022. Shares lost about 0.4% in early trading Tuesday.

The vast majority of Nvidia’s revenue will come from its Data Center business, which is expected to bring in $21 billion, up from $4.28 billion in the first quarter of last year.

The company’s Gaming division, once its largest segment, is expected to generate revenue of $3.5 billion, up from $2.24 billion in the same quarter last year.

Ahead of Nvidia’s earnings announcement, Stifel analyst Ruben Roy raised his price target on the company’s stock from $910 to $1,085, saying he expects what Nvidia is once again beating earnings and results expectations and raising its guidance for the next quarter.

Demand for its chips from hyperscalers like Amazon (AMZN), Google (GOOG, GOOGLE), Meta (META), Microsoft (MSFT), and others boosted the company’s results, making Wednesday’s report a key test of the industry’s appetite for new investments in AI.

And like Josh Schafer of Yahoo Finance reported TuesdayAI trading has crossed the boundaries of technology, with investors turning to energy and power companies as derivatives on the AI ​​boom.

But Roy, like analysts at BofA Global Research and Loop Capital, says near-term concerns remain about how the transition from Nvidia’s current Hopper line of AI chips to its Blackwell line will impact overall sales.

The fear is that customers will hold off on some of their orders for Hopper chips while they wait for Nvidia to roll out its more powerful Blackwell products. Tuesday, Amazon said he had transitioned an upcoming supercomputer project to Blackwell chips after arFinancial Times report suggested that the retail giant had suspended some chip orders.

Loop Capital’s Ananda Baruah argued that it’s possible Nvidia won’t let companies pause their Hopper orders without losing their place in the queue to buy Blackwell chips. If enough customers pause their orders in favor of Blackwell chips, Nvidia could experience a temporary quarter-over-quarter decline in sales.

Nvidia stock retreats from record high ahead of crucial first quarter earnings report

NVIDIA CEO Jensen Huang demonstrates products on stage during the annual Nvidia GTC artificial intelligence conference at the SAP Center in San Jose, California, March 18, 2024. (JOSH EDELSON/AFP via Getty Images) (JOSH EDELSON via Getty Images)

Nvidia also faces the threat of customers building their own AI chips in-house.

So far, Amazon, Google and Microsoft are using – or working on – their own AI chips that offer better power efficiency than Nvidia’s offerings.

That doesn’t mean these companies will completely abandon Nvidia’s chips, although the push toward their own products could reduce the chip giant’s market share. AMD (AMD) and Intel (INTC) are gaining ground when it comes to their own AI chips.

Tuesday, Microsoft announcement At its Build conference, it would begin offering AMD’s MI300X chips to developers looking to train and deploy AI models. The Windows maker, however, was also careful to point out that it also uses Nvidia’s chips.

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Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.

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