Chipmaker Nvidia releases its second-quarter earnings on Wednesday, and it will test the entire stock market rally.
NVDA – Daily Chart
NVDA stock trades at $129.37 after a big surge from August lows near $90. A downtrend line is being tested with crucial support at the $100 level. The all-time high at $140 would be the target for a strong earnings release.
The latest Treasury figures showed forecasters see UK economic growth to rise 1.1% for 2024, up from 0.9% last month. For 2025, forecasts were upgraded from 1.3% to 1.4, on average.
Wedbush Securities analyst Dan Ives has called it “the most important tech earnings in years”.
In his view, the entire bull market in tech stocks will hinge on underlying demand in Nvidia’s data centre capacity, which is needed for areas such as Large Language Model training. If the company misses earnings, then the entire market could be rattled.
Nvidia’s graphic processors have driven a gold rush in AI adoption, and the company has benefited as the early-mover.
“There is one company in the world that is the foundation for the AI Revolution,” Ives wrote on Thursday. “And that is Nvidia, with the Godfather of AI Jensen having the best perch and vantage point to discuss overall enterprise AI demand and the appetite for Nvidia’s AI chips.”
Nvidia’s stock stumbled to a low of nearly $90 in early August after a report from The Information said that its new Blackwell chips could be delayed by up to 3 months. However, analysts at UBS said the delay would only be around six weeks, which led to a 40% rebound in NVDA shares.
At the lows, an investor letter from the $70 billion hedge fund Elliott Management said Nvidia was a bubble and AI was “overhyped”.
Analysts at the firm were “sceptical” that Big Tech companies would keep buying the chipmaker’s graphics processing units in such high volumes and that AI is “overhyped with many applications not ready for prime time”.
Many of AI’s use cases are “never going to be cost-efficient, are never going to actually work right, will take up too much energy, or will prove to be untrustworthy”, the letter added.
Nvidia’s guidance for this Q2 release is for quarterly revenue of $28 billion, plus or minus 2%. That will be the line in the sand for this release. Growth has been slowing from the early days of the AI gold rush, and investors will want to see continued strength. Management comments on the Blackwell delay will also be essential to watch.
