On Wednesday, Nvidia (Nvidia) shares retreated from an all-time high, and the company will release its first-quarter earnings report after the market. The report is expected to be one of the most impactful for investors this year, as Nvidia has been at the center of the artificial intelligence boom driving the market for the past 18 months.
Wall Street expects the company's revenue and profit to increase by more than 200% and 400%, respectively, over the same period last year as the AI boom surges in demand for Nvidia chips.
Based on available data, analysts expect adjusted earnings per share of $5.65 and revenue of $24.69 billion. The company announced adjusted earnings per share of $1.09, and revenue for the same period last year was $7.19 billion.
Nvidia's stock price has been rising over the past year, up more than 200%, and closed at a record high on Tuesday. Since the stock market's low in October 2022, the stock has risen nearly 700%. Shares fell about 0.4% in early Tuesday trading.
Most of Nvidia's revenue will come from its data center business, which is expected to generate $21 billion in revenue, up from $4.28 billion in the first quarter of last year.
The company's previously largest business unit, the gaming division, is expected to reach $3.5 billion in revenue, up from $2.24 billion in the same period last year.
Prior to Nvidia's earnings announcement, Stifel analyst Ruben Roy raised his target price for the company's stock price from $910 to $1,085, saying he expects Nvidia's revenue and profit to once again exceed expectations and raise guidance for the next quarter.
Demand from hyperscale companies such as Amazon (Amazon), Google (Google), Meta, and Microsoft (Microsoft) for their chips boosted the company's performance, making Wednesday's report the key to testing whether the industry is interested in further investing in artificial intelligence.
As Josh Shaffer reported on Tuesday, AI deals have transcended the boundaries of the tech industry, with investors seeing energy and power companies as derivatives of the AI boom.
However, Roy, like analysts at Bank of America Global Research (BofA Global Research) and Loop Capital, said there are still concerns in the short term about how much the transition from Nvidia's current Hopper AI chip production line to Blackwell's production line will have a big impact on overall sales.
There is concern that customers will suspend orders for Hopper chips while waiting for Nvidia to launch more powerful Blackwell products. On Tuesday, Amazon said it had transitioned an upcoming supercomputer project to Blackwell chips after a Financial Times report suggested that the retail giant suspended some chip orders.
Loop Capital's Ananda Baruah believes that Nvidia may not let other companies suspend Hopper's orders, otherwise it will lose its place to buy Blackwell chips. If enough customers put their orders on hold and switch to Blackwell chips, Nvidia's quarterly sales could temporarily decline.
Nvidia is also dealing with the threat of customers developing their own artificial intelligence chips.
Until now, Amazon, Google, and Microsoft are using or developing their own artificial intelligence chips, which are more energy efficient than Nvidia's products.
That doesn't mean these companies will completely abandon Nvidia's chips, although launching their own products could cut the chip giant's market share. AMD (AMD) and Intel (Intel) are making progress on their own artificial intelligence chips.
On Tuesday, Microsoft announced at the Build conference that it will begin supplying AMD's MI300X chips to developers who want to train and deploy artificial intelligence models. However, Microsoft also made it clear that it is also using Nvidia chips.