After the closing bell on Wednesday, Nvidia will reveal its fourth-quarter earnings, which have been much anticipated lately. The famous AI chip has seen a substantial increase in share price over the past 12 months, rising 184%. It considerably outperforms AMD and Intel, whose shares have increased by 91% and 67%, respectively.
Due to its incredible growth last week, Nvidia’s market capitalization quickly surpassed Alphabet, the parent company of Google and Amazon. It is ranked third among publicly traded businesses worldwide. Only Apple and Microsoft have higher positions. However, as of Tuesday, Nvidia was no longer ahead of Amazon and Alphabet.
Analysts predict that Nvidia will announce modified earnings per share of $4.60 on $20.4 billion in revenue for the fourth quarter, up from $0.88 on $6.1 billion in revenue the previous year. That is a 234% rise from the prior year. To contextualize Nvidia’s results, the company disclosed $27 billion in earnings for 2022.
Analysts predict that Nvidia will generate $17.2 billion in revenue from its data center during the quarter, compared to $3.62 billion the previous year. The growth in generative AI app development and the resulting fast rise in demand for artificial intelligence have made Nvidia’s Data Center business its most significant source of revenue.
Meta plans to have installed 350,000 of Nvidia’s flagship H100 chips in its AI data centers by the end of 2024, as the company announced in January. Although Nvidia doesn’t reveal the cost of its chips, the H100 is thought to be in the millions of dollars range. Thus, Meta will be the only party to pay billions for Nvidia’s chips.
The gaming industry, formerly Nvidia’s most significant commercial sector, is predicted to bring in $2.7 billion this year, rather than $1.8 billion the previous year.
Additionally, analysts will be observing Nvidia’s future guidance. In the past few quarters, the company has comfortably exceeded sales forecast. Another beat would predict sustained growth in the AI trade.
Nvidia is expected to perform well would be an extreme understatement to say for now. Several Wall Street experts have modified their price goals for the company’s shares. For example, Ruben Roy of Stifel set a new objective of $865 from $665, and Timothy Arcuri of UBS increased the bank’s price goal from $580 to $850. Matt Bryson of Wedbush also raised the company’s price objective for Nvidia from $600 to $800.
However, obstacles to Nvidia’s expansion are present from all directions. AMD, the company’s primary opponent, is investing significantly in its artificial intelligence chips, such as the recently released MI300X. AMD says that the chip outperforms Nvidia’s H100 in specific workloads. However, Nvidia has denied AMD’s claims, declaring that AMD’s testing was insufficient. Additionally, Intel produces its server CPUs and keeps improving them.
Clients of Nvidia are also seeking more and more to create their own customized AI processors To lessen their dependency on Nvidia’s products. Some well-known companies selling or working on their in-house AI chips are Amazon, Google, Meta, Microsoft, and Tesla.
Unlike Nvidia’s more generic chips, those are customized to each company’s demands, increasing efficiency and power usage. However, Nvidia isn’t going to take this danger lightly. According to Reuters, the startup has reportedly spoken with Microsoft, Amazon, Meta, OpenAI, Alphabet, and Amazon to propose creating customized chips for them.
Apart from competitors, Nvidia faces challenges related to US export limitations on its most potent chips to China. Although the company claims that the restriction won’t affect its financial status, it fears losing out on future sales opportunities due to the measure.
