The world's highest valued semiconductor manufacturer today and one of the main beneficiaries of the AI trend, Nvidia (NVDA.US) will report Q1 results after the close of the Wall Street session. Shares are losing nearly 2.5% today, which can be linked to profit-taking and investor concerns around a possible disappointment in the report. The market will pay particular attention to revenue from the Data Center segment due to the fact that the company is a leading supplier of high-performance chips needed to scale the computational power of neural networks, driving AI development.
Revenue forecast: $8.28 billion vs. $5.66 billion (estimated $6.51 billion (21% y/y decline)
Projected earnings per share (EPS): $0.92 vs. $1.36 in Q1 2022 (36% y/y decrease)
Estimated net income: $1.48 billion vs. $1.61 billion in Q1 2022 (8% y/y decrease)
Estimated Data Center revenue: $3.75 billion vs. $2.05 billion in Q1 2022
Growth projections around the data center segment have been responsible for much of the market's optimism in recent months, and it is likely to be the one that Wall Street will pay particular attention to. The stock has gained nearly 100% since inception, and the market would like to see a strong report from Nvidia to confirm that investors' expectations for future growth in the company's business are reasonable. Recently, many analysts have indicated that the valuation has become too optimistic. On Monday, Deutsche Bank commented that the Q1 report will be key - it will show whether the company's very high valuation is justified.
- Despite the optimism surrounding the Data Center segment, the market expects revenues to decline by more than 20%, which would mark the largest y/y decline since 2019;
- Data center revenue in Q4 2022 accounted for nearly 60% of the company's revenue and proved to be one of the few segments to see a y/y increase (11%). Revenue from the gaming industry performed poorly in the previous quarter, a trend that may continue;
- KeyBanc analysts pointed to a somewhat disappointing RTX4070 launch. They also suggested that supply may limit more significant short-term price increases for data center GPUs such as the A100 and H100;
- The AI trend has been a powerful catalyst for increases in many companies on the Nasdaq, and the market is reacting positively to news of business developments toward artificial intelligence;
- Analysts indicate that Nvidia's market share in the data segment could be as high as 90%; ChatGPT algorithms have been 'trained' on the company's chips (GPUs). CEO, Jensen Huang in March indicated that the company was experiencing higher demand for AI-related products with which he raised market expectations around the company's business development;
- Media reports indicate that Nvidia is working with British researchers to build a supercomputer powered by its own central processing unit (CPU), which would put it in competition with other processor manufacturers.
Since the beginning of the year, Nvidia's stock has done better than all big competitors like Advanced Micro Devices (AMD.US) and Intel Corp (INTC.US), Micron (MU.US) and Taiwan Semiconductor (TSM.US).
Thanks to the new AI trend that has been driving the Nasdaq since the beginning of the year, Nvidia shares were near historic highs and did better than most of its competitors in the technology sector. Source: Bloomberg
Nvidia shares (NVDA.US), H4 interval. Since the beginning of the year, the 100-session average (SMA100, black line) has provided significant support for the bulls. The range between $280 and $270 appears to be a key short-term support - also due to the close support of the 23.6 Fibonacci retracement. If Q1 results and forecasts issued by the company live up to expectations, significant support can be expected at these levels.If the sell-off were to deepen, the $240 level could also prove important due to the 38.2 Fibo abolition of the upward wave initiated in October and previous price reactions. Source: xStation5
