Despite the recent rebound in tech stocks, shares of big-name stocks like Alphabet (GOOG, GOOGL), Amazon (AMZN) and Microsoft (MSFT) have fallen over the past month as investors question the sustainability of artificial intelligence.
Shares of Google parent Alphabet fell 14%, Amazon fell about 8%, and Microsoft was down more than 7% by Thursday’s close. But Nvidia’s earnings report later this month could be a big catalyst for the Big Tech and AI trades.
Dan Howley of Yahoo Finance reports:
The chip company’s performance could change the AI trade more than any hyperscaler. Unlike software companies, Nvidia’s earnings haven’t been a problem. Still, if it falls short of Wall Street’s already sky-high expectations, the AI trend could fall as well.
Alphabet, Amazon, and Microsoft’s AI spending may give investors pause, but it’s helping Nvidia’s bottom line. The company’s Hopper AI chip is the most sought-after on the market, and the company plans to ramp up production of its Blackwell line later this year.
The company controls 80% to 95% of the high-performance AI chip market. According to ReutersThat means whenever a company says it’s investing in AI capabilities, it’s likely to buy or at least use Nvidia’s processors.
But Nvidia’s Q2 report also signals the start of a difficult year-over-year revenue growth comparison that spans several quarters. The company’s financials Sales for Q2 2024 Data center revenues were up 141% to $10.3 billion, up 101% year-over-year.
In subsequent quarters, the chip giant has posted more impressive annual profits. But the party won’t last forever. In its most recent quarter, Nvidia reported $26 billion in revenue, up 262% from the $7.19 billion the company reported the year before.
Wall Street analysts are expecting $28.6 billion in revenue for the upcoming second quarter, up 112% year-over-year. That’s still a huge increase in revenue, but not quite the growth the company has seen in previous quarters. And that could be a turnoff for some investors.
That doesn’t mean that Nvidia won’t continue to rake in cash, or that Wall Street is negative on the company. As of Thursday, 66 analysts had a buy rating on Nvidia stock, just seven had a hold rating, and just one had a sell rating.
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