All eyes are on Nvidia in what could be the most important earnings report of the season

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All eyes are on Nvidia in what could be the most important earnings report of the season
Nvidia CEO Jensen Huang.I-Hwa Cheng/AFP/Getty Images
  • This post originally appeared in the Insider Today newsletter.
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AI’s golden child takes center stage today.

Nvidia is set to post its fourth-quarter earnings after the bell in what could be the most important report of the season.

The chipmaker is the proverbial pick-and-shovel salesperson in the AI gold rush. Its GPUs play a crucial role in powering large-language AI models like ChatGPT.

Nvidia is also part of the all-encompassing “Magnificent 7”. But even within that elite group of Big Tech stocks, it’s set itself apart.

The world’s third most valuable company’s shares have skyrocketed 230% over the past 12 months. That performance has far outstripped the rest of the Magnificent 7. Only Meta has posted comparable returns during that timeframe, rising 170%.

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Still, there’s a risk the semiconductor giant’s stellar run stalls. Regulations have limited Nvidia’s business in China, a market that accounted for 20% of its revenue in 2023. And when a stock jumps so quickly in a short period, there are always questions about whether its valuation is sustainable.

Business Insider’s Matthew Fox has a rundown on what Wall Street expects out of Nvidia’s earnings report.

The chipmaker’s customers’ recent successes could be a good omen. Other Big Tech stocks’ strong earnings results in the past few weeks, partially fueled by their investment in AI, serve as another feather in Nvidia’s cap.

“If AI is the next industrial revolution, then absolutely we could see Nvidia’s valuation surge continuing,” XTB research director Kathleen Brooks recently told BI.

All eyes are on Nvidia in what could be the most important earnings report of the season
A bicyclist drives past a sign outside of a Nvidia office building in Santa Clara, Calif., Wednesday, May 31, 2023. (AP Photo/Jeff Chiu)Jeff Chiu/AP Photo

Nvidia’s earnings report could have wider implications for the market.

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One expert said that disappointing results could lead to a wider sell-off where stocks drop by as much as 10%, BI’s Aruni Soni reports.

Part of the issue is that investors are short of cash, making it more difficult for them to buy the dip if the market tumbles.

Some investing gurus have also been predicting that money will rotate out of the Magnificent 7 this year.

There’s also the question of whether people will continue to buy Nvidia. The company’s stock surpassed Tesla as the most-traded stock during the last 30 trading sessions, BI’s Phil Rosen writes.

“It could be one of the cases where it has good numbers, it bounces after the numbers, and everyone looks around and goes: who's the buyer? Turns out no one is a buyer," Academy Securities’ Peter Tchir said of Nvidia during a recent interview.

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One person who won’t be buying Nvidia: Cathie Wood.

Wood’s Ark Invest has been selling its shares, and the polarizing investor said on Sunday that “expectations could be getting ahead of themselves” for the AI darling.

That dismissal might end up being a blessing in disguise, rather than the kiss of death. A hellish two-year trading stretch means that Ark Invest has now destroyed $14.3 billion in wealth over the past decade, according to Morningstar estimates.

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