Nvidia loses sightly ahead of today earnings report🕤 What to expect 📊

Nvidia (NVDA.US) will once again be in the spotlight of the markets, as the company will report results for fiscal Q4 2025 (calendar Q3 2024) today after the US session. After more than 180% share price appreciation since the beginning of the year, the company has become the world's most valuable publicly traded company, and valuations so demanding that even a very good report (actually, no other is being considered) may not be enough to induce hundreds of billions of dollars more to buy the stock and stop profit taking. The unofficial bar for Nvidia is set high, and investors are hoping above all for great forecasts that could 'erase' any partial disappointment in quarterly results, which according to Bloomberg Intelligence may have been affected by logistical problems. 

• Sales forecasts point to 84% year-on-year growth and a result of $33.28 billion, while the company itself expected $32.5 billion in Q2, with a 2% margin of error. The market expects the data center sector to post revenues of $29.5 billion; which would represent a 200% year-on-year increase. Earnings per share are expected to rise 89% year-on-year to $0.74.
• Amazon, Microsoft, Alphabet and Meta Platforms have signaled high spending on data centers and broader AI infrastructure going forward, and are Nvidia's largest customers. All of these companies (with the exception of Super Micro Computer) are doing well, which can no doubt be interpreted as a good prognosticator for future quarters, the question is, will the new forecasts be enough to boost the market?
• Nvidia's gross margin fell to 75.1% in the second quarter, down from 78.4% in the first quarter. Costs will therefore also be in focus, although analysts expect Q3 margins will likely fall further to 74.4%; Nvidia expected higher operating costs (at least $3 billion) in Q3.
• BNP Paribas expects the company to beat sales expectations by $2 billion, reporting approx. US$35.5 billion and will issue sales forecasts US$4 billion higher quarterly (forecast, for the current quarter). The full-year revenue forecast for fiscal 2025 (2024 calendar) is expected to be more than $125 billion. Analysts' average forecast for Nvidia shares is about $159 per share (about 10% above the current share price). The market is pricing in 8% volatility on the stock, following the report. The spread of expectations for the sale according to Bloomberg analysts is currently $8 billion, which shows that the market believes the surprise could 'go' both ways today.

Blackwell AI - catalyst for another wave of growth or the beginning of problems?

• The focus of the markets will be the company's comments on Blackwell AI chips, which are expected to be an increasingly important sales driver for the company in the coming quarters, potentially deepening its business moat in the high-performance GPI industry, where its market share currently stands at around 90%.
• Nvidia is 'advertising' Blackwell chips, suggesting that buying them will be cost-effective for companies; reducing operating costs and power consumption by up to 25 times when using LLMs (large language models). 
• The Information pointed to overheating problems with Nvidia's Blackwell processors when installed in server racks; however, the market has erased some of the negative reaction to these reports. It is known that mass production of Blackwell chips has been postponed from Q3 to December this year, due to unspecified design problems.

As a result, it is the commentary on the matter that may shape the markets' reaction. Buyers would likely want the company to confirm December as the start of production and emphasize that demand for Blackwell is at a record high and significantly exceeds its production capacity. The more uncertainty the company signals on this topic at the conference (or worse, postpones the start of production to 2025), the more violent the market reaction is likely to be. Another topic the market will pay attention to is the situation of Nvidia's business in China and its possible comments on the possible effects, of the new U.S. tariff policy in the context of the U.S. Reciprocal Trade Act, which could hit companies 'circumventing' U.S. sanctions. 

Nvidia shares (NVDA.US)

Nvidia shares are testing the upper boundary of the uptrend channel and are trading nearly 30% above the 200-session exponential average, EMA200 (red). A great report, forecasts and positive news on Blackwell could take the stock above the upper limit of the channel, which would represent a very large new buying impulse and a higher premium in valuations. On the other hand, a disappointment could lead to at least a test of market strength, with the EMA50 at $137 per share.

Source: xStation5