Nvidia Q3 earnings — Tuesday, 21 November

Artificial intelligence continues to take centre stage in this season of technology company earnings as demand for AI microchips and semiconductors keeps growing at an exponential rate. At the forefront of this landscape is Nvidia, which is currently producing 70% of the chips and semiconductors used in AI applications globally.

As anticipation builds, Nvidia's upcoming earnings report, scheduled for release at 4:00 pm New York time on Tuesday, 21 November, is poised to provide critical insights into the company's performance and the broader trajectory of the AI-driven technology sector.

What to expect from the Nvidia earnings report?

According to Bloomberg, Nvidia’s third-quarter revenue is expected to rise to 16.04 billion USD from 13.5 billion USD last quarter, while earnings per share (EPS) is expected to rise from 2.70 USD in the last quarter to 3.36 USD.

Investors will also be looking at Nvidia's forward guidance, especially in light of the recent US export controls, which have restricted the export of Nvidia’s A800 and H800 chips to China. According to the Financial Times, Nvidia is planning to release three new chips, H20, L20 and L2, tailored for China that comply with US export controls.

Nvidia has also just announced the unveiling of its upgraded H200 AI chip, boasting enhanced memory bandwidth and capacity compared to the H100. Investors will also be analysing the new chip sales projections, which are scheduled for release in the second quarter of 2024.

Nvidia's Second Quarter Financial Report

In the second quarter, Nvidia beat market expectations, showcasing significant growth across key indicators. Notably, the company reported an EPS of 2.70 USD, surpassing Bloomberg's expected 2.07 USD. Revenue for the quarter reached 13.51 billion USD, up 88% from the previous first quarter and exceeding Bloomberg’s estimate of 11.04 billion USD. Nvidia also announced a stock buyback of 7.5 million shares and the distribution of dividends totalling 3.38 billion USD. Their shares climbed 6% in extended trading after the release.

During the post-earnings press conference, Nvidia's CEO, Jensen Huang, highlighted the proactive embrace of faster computing and AI technologies by companies worldwide. The company’s success was particularly driven by its data centre business, fueled by the demand for its A100 and H100 AI chips, crucial for developing and running artificial intelligence applications like ChatGPT. 

Analyzing Nvidia's Q3 Earnings: Implications for Stock Direction and the AI-Tech Sector

The stock has been the top performer in the S&P 500 index this year, up 230%. It recently has been consolidating within a 100 USD range, approaching a strong resistance level around the 500 USD mark. 

The earnings report should help traders clarify whether Nvidia is a buy or a sell at these all-time high levels. With weaker results, we may see a decline towards the support levels of 470 USD and 450 USD. However, a positive report may propel the stock to new highs above 500 USD.

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It is important to also consider that Nvidia has a price-to-earnings ratio above 113, causing some investors to say the stock is overpriced. 

Comparing this ratio to Qualcomm, one of its smaller competitors reveals a stark contrast. Qualcomm’s price-to-earnings ratio is at 18.73, much lower than Nvidia's. In their most recent earnings report, Qualcomm’s EPS came in at 2.02 USD, beating Bloomberg’s estimate of 1.92 USD. Revenue came in at 8.67 billion USD, higher than the expected 8.51 billion USD. They also gave a strong forecast for the current quarter and rose over 3% in extended trading after the release. In fact, many investment banks, such as JP Morgan, have a strong buy rating on the stock.

Regardless of whether you think Qualcomm is a better buy or not, the upcoming third-quarter earnings report from Nvidia is positioned to offer crucial insights into the overall direction of the AI-driven technology sector. Keep an eye out for whether their EPS and revenue beat market expectations and what forward guidance is given for the future growth of the company. Stay tuned.