Nvidia: The Most Important Stock on Wall Street
The emergence of robust “large language models” (LLMs) like OpenAI and Microsoft’s (MSFT) ChatGPT, and Alphabet’s (GOOGL) Gemini have been a primary driver for the current equity bull market.
While AI profitability has yet to prove significant for these tech giants, the mass and rapid adoption of these chatbots has ignited a surge in demand for the entire industry as the world’s most innovative companies jockey for AI dominance. Though most people are familiar with client-facing chatbots, foundational technologies for AI, such as semiconductors have been the largest beneficiaries of the AI buildout.
While several chip makers like Advanced Micro Devices (AMD) and Intel (INTC) benefit from increased AI demand, Nvidia (NVDA) has become the most important stock on Wall Street due to its integral role in unleashing the potential of the AI revolution. Driven by soaring demand for its high-performance GPUs (essential to training and operating complex AI models), NVDA shares have increased some 800% over the past two years, and its market cap has swelled to $3.5 trillion.
5 Big Questions for Nvidia Stock
While NVDA has trounced Wall Street Estimates and trended higher for multiple years, a lot of uncertainty exists heading into its earnings report on Wednesday after the market close. Below are five questions to ponder into NVDA earnings per share (EPS):
1. Have Blackwell issues been resolved?
Nvidia’s next-generation Blackwell server promises to usher in significantly improved performance and efficiency for AI workloads that train chatbots like ChatGPT. However, NVDA shares saw some turbulence recently after a report suggested that Blackwell servers were overheating.
2. How much have Super Micro Computer’s Accounting issues impacted Nvidia?
Super Micro Computer (SMCI) is a critical NVDA supplier. SMCI manufactures high-performance servers and workstations needed to run NVDA’s technology. Shares have plunged recently after a short-focused Wall Street firm raised accounting concerns about SMCI. Several days later, SMCI delayed releasing its financials after two auditors quit (citing concerns about the company’s financial health).
As a result, NVDA diverted some of its business to Dell (DELL). Meanwhile, SMCI promised to release its updated financial results this week to ensure the firm is not delisted from the Nasdaq. Nevertheless, Nvidia investors will want to know how much any SMCI disruptions will impact this quarter’s results.
3. Have Nvidia’s profit margins stabilized?
Last quarter, Nvidia’s profit margins slowed for the first time since the tech bear market in 2022. The company blamed “product issues” for the slight decrease in margins. While NVDA’s margins remain juicy, Wall Street is a forward-looking mechanism, and any further reduction in profit margins will be a red flag.
Image Source: Zacks Investment Research
4. What will forward guidance look like?
Analyzing forward EPS guidance is the most accurate way to predict future stock prices. NVDA earnings are expected to explode by 106.64% next year, but investors will be watching any guidance updates closely.
Image Source: Zacks Investment Research
5. Beyond AI, what are Nvidia’s growth prospects?
Currently, Nvidia derives the bulk of its revenue growth from AI. However, the company is making a foray into the autonomous vehicles segment. NVDA expects its automotive total addressable market (TAM) to swell to $30 billion in 2025.
Bottom Line
Nvidia is a cash-rich company with a robust balance sheet and rapid EPS growth prospects. However, ahead of earnings Wednesday, more questions than answers exist.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpIntel Corporation (INTC) : Free Stock Analysis Report
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Dell Technologies Inc. (DELL) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Super Micro Computer, Inc. (SMCI) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
