Nvidia profits are coming. Why the offer is crucial for the stock. -Barron’s

Nvidia is likely to thrive despite recent uncertainty in the AI ​​space, from management turmoil at OpenAI to the U.S. government tightening chip export restrictions.

The big question is what management will say about its progress in easing supply constraints to meet rising demand when the company reports earnings after the market closes on Tuesday.

Wall Street’s consensus estimate is for Nvidia (ticker: NVDA) to report October-quarter revenue of $16.2 billion and adjusted earnings per share of $3.37. Analysts estimate sales for the current quarter at $18.0 billion.

Nvidia shares lost 0.8% in Tuesday trading. The iShares Semiconductor (SOXX) exchange-traded fund fell 1.9%.

Last week, Piper Sandler analyst Harsh Kumar reiterated his “Overweight” rating on Nvidia stock and reiterated his $620 price target on the stock.

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“We believe demand from U.S. cloud and other data center customers remains strong and intact as these companies continue to transform their data centers with accelerated computing capabilities,” he wrote. “The company’s main concern remains the supply of GPUs.”

Nvidia dominates the market for chips for AI applications, making it the main beneficiary of the trend. Its GPUs are well-suited to the parallel computations needed to train AI models and support customers.

The company’s current high-end H100 became available in large quantities earlier this year and quickly became the tech industry’s most valuable resource as increasing enthusiasm for generative artificial intelligence led to product shortages.

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Earlier this month, Nvidia announced its next major AI chip, called the H200 Tensor Core GPU, which is scheduled to launch in the second quarter of 2024. This could trigger another wave of demand.

The company is also starting to bring chips to market more quickly. In October, Nvidia updated its investor presentation to show that the chipmaker was moving from its previous two-year product cycle to a one-year cycle for AI chips. A slide in this document shows that Nvidia plans to launch more high-end AI products in 2024 and 2025.

Write to Tae Kim at [email protected]