As this round of US stock earnings season draws to a close, Nvidia, the "AI shovel seller", is about to make its final debut.
On May 22 (May 23, Beijing time), after the US stock market was closed, NVIDIA, known as the "most important stock on earth" by Wall Street, will announce its financial report, and its performance will have a significant impact on its own share price and the direction of the US stock market. After soaring 239.02% in 2023, Nvidia rose 91.40% again this year (as of the close on May 20, EST).
At present, the market estimates that NVIDIA's revenue in the first fiscal quarter of fiscal year 2025 is expected to reach 24.65 billion US dollars, more than double the year-on-year growth, while the revenue guidance given by NVIDIA before is 24 billion US dollars, up or down 2%. The market also estimated that Nvidia's net profit in the first fiscal quarter was US $12.87 billion, with a year-on-year growth of more than 500%.
On the eve of the release of the blockbuster financial report, Nvidia's share price quietly approached a new historical high. On May 20, Nvidia rose 2.49% to close at $947.8, not far from the historical high of $974. At the same time, other technology stocks also rose one after another. The Nasdaq Composite Index reached a record closing high, rising 0.65% to 16794.87.
What signal does Nvidia release when it quietly approaches a new historical high? The next financial report is crucial. What will Nvidia deliver this time? Can the stock price hit a new historical high?
Nvidia's performance may exceed expectations again
With the announcement of the blockbuster financial report imminent, the market is optimistic about Nvidia's overall performance.
For the upcoming first fiscal quarter results, HSBC analyst Frank Lee predicted that Nvidia's revenue would reach $26 billion, higher than the guidance of $24 billion given by Nvidia in February and Wall Street's expectation of $24.65 billion. He also predicted that Nvidia's revenue in the second fiscal quarter would reach $28 billion, also higher than the market expectation of $26.48 billion.
Nvidia's data center business is the focus of attention. In the fourth fiscal quarter of fiscal year 2024, NVIDIA's data center business income reached $18.4 billion, more than five times the same period of the previous year, and also broke the record high set in the previous fiscal quarter. About 40% of this $18.4 billion came from AI reasoning.
Nvidia's data center business income may reach a new high this time. According to the estimated data compiled by Visible Alpha, the revenue of Nvidia's data center department in the first quarter of fiscal 2025 may reach $21.17 billion, up 15% month on month.
Yingjie, a senior US stock analyst, said to the 21st Century Business Herald reporter that Nvidia's quarterly revenue soared from $2 billion to $20 billion, a 10 fold increase, thanks to AI. Only once did the 21 financial reports released in the past fall short of expectations, and the performance guidance also steadily exceeded expectations. According to the first quarter financial report data released by Microsoft, Google, Amazon and Meta, this year's capital investment in cloud computing is up to 177 billion dollars, far higher than last year's 119 billion dollars, and will continue to increase to 195 billion dollars in 2025. These investments will drive Nvidia's data center revenue and profit growth.
The new progress of Blackwell series chips also needs close attention. Fu Yingjie said that in terms of hardware, the better supply of H100 GPUs and the strong demand of China for H200 GPUs provided strong support for Nvidia's performance in the current quarter. The upcoming Blackwell series GPUs are expected to be launched in the second half of this year. In particular, B100 and B200 are expected to increase sales from the third quarter and occupy most of the market share in the fourth quarter. The average selling price of these two GPUs is about 40% higher than the existing products, indicating a higher income potential.
John Vinh, an analyst at KeyBanc Capital Markets, believes that Nvidia expects to launch a new generation of Blackwell GPU in the second half of the year. There is limited evidence of demand suspension at present. It is expected that Nvidia's performance guidance for the first and second fiscal quarters will significantly exceed expectations.
The first quarter financial reporting season of the US stock market is drawing to a close. All major institutions have announced their positions in the US stock market, and capital is in favor of Nvidia Dager. About half of the top ten hedge funds in the world have heavy positions in Nvidia, and Bridgewater, AQR and Castle Investment bought Nvidia and its related targets in a large scale in the first quarter.
Zhang Zhuran, the chief researcher of Shanghai Zemujia Information Technology Co., Ltd., said to the reporter of the 21st Century Economic Report that at present, many investors and institutions around the world hold a large number of NVIDIA shares, and everyone's mood is optimistic. Otherwise, it would not be possible to have such a large position. This is not only optimistic about "AI dealers", but also optimistic about their own judgment, Giving a more reasonable reason for holding positions is often what investors are good at and willing to do.
Can the stock price hit a new historical high?
As for Nvidia, whose stock price is only a short cut from its historical high, if it releases strong performance and optimistic guidance, its stock price may hit a new record.
Zhang Chi, chief analyst of Fangde Securities, told reporters of the 21st Century Business Herald that the current valuation of Nvidia is not expensive even if the big logic remains unchanged. Even if Nvidia has increased by 90% this year, PE is expected to be only more than 30 times. The 28 times valuation of the information technology sector is the most expensive among all S&P industries, but the profit is also the fastest growing among all industries. There is no need to worry too much about US stocks supported by profits. Even if Nvidia's growth slows down, other companies will make up and expand the market together.
At present, Wall Street generally expects that it is only a matter of time before NVIDIA shares hit a new record. Goldman Sachs said that there is still much room for Nvidia's stock to rise in the future, and raised its target share price from $1000 to $1100. Considering the rapid growth rate of Nvidia and the persistence of this growth trend in the coming years, its stock valuation is still relatively attractive compared with its peers.
AI is still the main growth driver of Nvidia. Goldman Sachs expects that the performance of Nvidia's data center in the second and third fiscal quarters of this year will benefit from the strong demand for AI related computing and networks. In addition, the capital investment of Microsoft, Google, Amazon and Meta in cloud computing has continued to grow this year, which will also provide impetus for Nvidia's revenue and profit growth.
Echoing this, Frank Lee also believes that investors currently underestimate the prospect of NVIDIA's AI business, and there is still a lot of room for growth in the future. Frank Lee reiterated his buy rating and raised Nvidia's target price from $1050 to $1350.
However, some investors are still preparing for the possible impact of the financial report. The options market is betting that NVIDIA's share price may fluctuate by 10%. According to the data from the Chicago Board of Options Exchange, investors buy Nvidia's call options and put options at the same time through a compound option strategy called Straddle, betting that Nvidia's share price will fluctuate in both directions. The pricing of the straddle option portfolio strategy shows that the market's expectation of NVIDIA's share price fluctuation is about 10%.
In Fu Yingjie's opinion, Nvidia's performance should not be too worried, but the quarterly stock market of the US equity round has one major feature, that is, the performance is good, and the stock price may also fall. In the past few weeks, the financial reports of several top technology companies triggered selling, including ASML, Intel, AMD, SMCI and ARM. This has a lot to do with the high valuation and the decline of future performance guidance. In the face of the current high valuation, Nvidia needs to continue to demonstrate its innovation ability and market leadership in the core market in this financial report, such as AI and game hardware, so that it can support the current high market value and further promote the stock price. Otherwise, once the market is disappointed, especially the growth that has been lower than expected for several consecutive quarters, Nvidia will enter a headwind market that will kill the valuation.
AI craze "to be continued"
Behind the surge of US stocks this year, the AI boom behind Nvidia has become an important catalyst for market growth. As of May 20, the S&P 500 index rose 11.29%, the Nasdaq index rose 11.88% and the Dow index rose 5.62% in the year.
Zhang Chi said to the reporter that the AI boom is essentially a cycle of chip semiconductors. This cycle is generally around 3 to 4 years, and 2022 is the bottom of the cycle. Now about 2 years later, it is also very hot. In the past, the Internet, smart phones, and automotive electronics have all had similar quotations, but this boom is driven by AI.
From the point of time, Zhang Chi said that Apple's smart phones have become more and more popular since the iPhone 3 to 4, and have developed for more than ten years now. There are indeed small cycles in three to four years, but several small cycles form a large cycle, and the bottom is constantly rising. Automotive electronics has also been a bull situation. The AI boom will not end like this in just two to three years. It may be slow because there is no popular application that can carry AI in the short term. However, it is still early to say that the end of the trend, and there are still many scenarios at the software and application levels that have not been penetrated. In addition, the profitability of AI Company is also very strong, not only Nvidia, but also on the global industrial chain, which is one of the core reasons driving the US stock market to constantly reach new heights.
According to the data of London Stock Exchange Group (LSEG), among the expected earnings of $494.4 billion in the second quarter of the S&P 500 Index, the communication service industry including Google and Meta, and the information technology industry including Microsoft, Apple and Nvidia will contribute more than half of the earnings.
In Zhang Zhuran's opinion, AI is not really a new concept, it has existed for decades, but the real commercial operation, a large number of "visible" AI is also the matter of the past two years, and related companies also have very broad prospects. Unlike the Internet bubble around 2000, the threshold for chips and AI is much higher, and this round of technology bull market is still expected.
However, it is not advisable to pay too much attention to Nvidia. Bank of America pointed out that if investors focus too narrowly on GPU chips, they will undoubtedly miss a more profitable investment opportunity. For example, Vertiv, which produces power and cooling equipment for data centers, has risen much more than Nvidia: since May 24 last year, Vertiv has surged 516%, easily surpassing Nvidia's 211% rise, while the S&P 500 index has only risen 29% in the same period. The excellent performance of Vertiv means that the rise of AI is expanding and covers more and more industries.
In the long run, Fu Yingjie believes that the AI wave is still in the first half. In 2023, the size of AI market will be about 135.94 billion dollars, and it is expected to reach an astonishing 826.76 billion dollars by 2030, with an average annual growth rate of 28%. As the leader in the field of artificial intelligence, even if Nvidia's financial report is weaker than expected this time, its long-term value and market position will not be shaken by an unsatisfactory financial report.
(Author: Wu Bin Editor: Hu Huiyin)
