Tech darling Nvidia’s earnings a litmus test for AI-driven market frenzy

Tech darling Nvidia’s earnings a litmus test for AI-driven market frenzy

In the realm of technology and finance, all eyes are currently fixed on Nvidia’s earnings reports scheduled for release on Wednesday, February 21st.

This is anticipated to serve as a crucial litmus test for both the company’s performance and the broader artificial intelligence (AI) market trend that has been driving recent gains in U.S. stocks.

Goldman equity analysts noted in a recent publication that Nvidia’s quarterly results this coming Wednesday “will be closely watched as a barometer of AI momentum.”

Analysts project that Nvidia will announce earnings per share of $4.56 and a substantial increase in quarterly revenue to $20.378 billion, compared to $6.05 billion in the previous year.

Analysts are optimistic about Nvidia’s performance, expecting earnings of $5 per share for the fiscal first quarter, reflecting a remarkable 359% increase, with sales reaching $22.12 billion, marking a 208% rise.

Looking ahead, analysts anticipate a 3.9% year-over-year earnings growth for the first quarter of 2024 and a 9.0% growth for the second quarter of the same year. Overall, for the entire calendar year of 2024, analysts predict a 10.9% year-over-year earnings growth, as per data from Factset.

Investors are particularly interested in Nvidia’s guidance, seeking clues about the longevity of the current surge in spending on data centre-based AI. Cloud service providers have been actively acquiring Nvidia’s graphics processing units (GPUs) to power various AI applications.

Nvidia’s stock has experienced a meteoric rise, increasing by nearly 50% this year alone on the back of the AI euphoria. In 2023, Nvidia’s shares soared by an impressive 240%, cementing its reputation as a leader in the AI industry.

“We continue to see a very strong near term picture and think that various second derivative anxieties are missing the bigger picture; we raise “price target” yet again. Longer term, cloud commentary is encouraging, but we do continue to budget for a plateau in 2025,” noted Joseph Moore, Equity Analyst at Morgan Stanley.

Morgan Stanley increased Nvidia’s price target from $603 to $750 on February 7th.

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