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Want to know how much is riding on Nvidia\u2019s second-quarter earnings report today? Just ask Patrick Moorhead, the founder and CEO of Moor Insights & Strategy.<\/p>\n
\u201cPretty much everything,\u201d he told\u00a0Yahoo<\/a> Finance<\/em>\u00a0on\u00a0Tuesday<\/a>.\u00a0<\/p>\n Even smaller companies in the enterprise software business that have only tangential relevance to the AI gold rush\u2014like a ServiceNow<\/a>, SAP<\/a> or Adobe\u2014stand to sink or swim, in his view from Nvidia\u2019s report: \u201cIt will take the entire tech market with it, up or down.\u201d<\/p>\n The options market is predicting its earnings could trigger a 10% swing in the value of Nvidia shares alone, the most in three years, according to data from analytics firm ORATS cited by\u00a0Reuters<\/em>. That equates to roughly\u00a0$300 billion<\/a>, or the entire value of a Coca-Cola<\/a>, Bank of America<\/a> or Netflix<\/a> \u2014 companies that are among the top 35 in the world measured in market capitalization.\u00a0<\/p>\n \u201cIt\u2019s the most important stock in the world right now,\u201d EMJ Capital\u2019s Eric Jackson admitted\u00a0last week<\/a>.<\/p>\n In other words it\u2019s not just sell-side bulls like Wedbush Securities\u2019 Dan Ives that are painting today\u2019s results as a\u00a0make or break moment<\/a>\u00a0for the entire tech sector.\u00a0<\/p>\n Part of the reason so much is hanging in the balance is the extreme pendulum swing in greed and\u00a0fear<\/a>\u00a0experienced at the start of this month. The single\u00a0worst day<\/a>\u00a0for stocks since 2022 was followed by the single\u00a0best\u00a0<\/em>day<\/a>\u00a0for stocks since 2022 in the span of\u00a0less than one week<\/em>.\u00a0<\/p>\n At the forefront of that action was Nvidia, which has been fueling record highs in the broader S&P 500 and Nasdaq<\/a> indexes in recent weeks.\u00a0<\/p>\n Nvidia is the bellwether in the broader AI trade precisely because it is leagues ahead of the competition, controlling roughly\u00a090% of the global market<\/a>\u00a0in AI training and inference chips. Competitors large and small\u2014whether Lisa Su\u2019s AMD<\/a> or startup firm\u00a0Groq<\/a>\u2014have neither the hardware nor the software to challenge its dominance.<\/p>\n The biggest immediate threat to Nvidia\u2019s stock price then is really itself, now that investors are becoming accustomed to its exponential growth.\u00a0<\/p>\n Its data center revenue has ballooned over the past twelve months, expanding at a compound rate of 52%\u00a0each and every quarter<\/em>\u2014from just $4.3 billion in Q1 of last year to a staggering $22.6 billion in Q1 of 2024.<\/p>\n The question has been how sustainable this is going forward. A company like Nvidia cannot keep growing its overall top-line by nearly a factor of four from one year to the next.<\/p>\n That may be why CEO Jensen Huang has forecast the pace will cool slightly in the second-quarter. He expects total revenue across all lines of business of around $28 billion, a sequential increase of 7.5% over the first three months of this year, combined with a non-GAAP gross margin between 75%-76%.\u00a0<\/p>\n Assuming results are bang in line with its guidance, this would represent a slowdown over the 18% quarter-on-quarter gain in turnover and 78.9% gross margin it reported in May.<\/p>\n Chief among potential near-term risks investors will focus now is the rollout of Blackwell, its next generation AI chip architecture capable of training trillion-parameter large language models at four times the speed of its Hopper H100 chip while\u00a0consuming less electricity<\/a>.\u00a0<\/p>\n Amazon<\/a>, Google<\/a>, Meta, Microsoft<\/a>, OpenAI and Tesla<\/a> have all signaled their intention to buy the newest B200 GPUs, according to Nvidia. While Huang promised his latest blockbuster product would hit markets this year, a report in\u00a0The Information<\/em>\u00a0suggests there could be up to a three-month delay due to a\u00a0design flaw<\/a>.\u00a0<\/p>\n \u201cThis Blackwell [risk] is probably the most important \u2018X\u2019 factor about the quarter,\u201d Gene Munster of Deepwater Asset Management told CNBC on\u00a0Tuesday<\/a>. He expects the stock, which is just shy of its all-time high, will see some modest selling after the results.\u00a0<\/p>\n The stock closed on Tuesday at $128.30 after peaking at just over $140 a share in June. Should Tuesday\u2019s results drive a 10% gain, it will be back to its all-time highs.<\/p>\n<\/div>\nBlackwell delays could threaten exponential growth in its AI chip business<\/h2>\n
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