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Nvidia earnings, revenue expected to surge first quarter as AI trade faces latest test

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Nvidia (NVDA) is set to report its first quarter earnings after the bell on Wednesday in what will be one of the most consequential reports for investors this year.

Wall Street is expecting Nvidia to report revenue and profits that rose more than 200% and 400%, respectively, from the prior-year period as the company experiences a surge in demand for its chips amid the AI boom.

Analysts expect adjusted earnings per share to total $5.65 on revenue of $24.69 billion, according to data from Bloomberg. The company reported adjusted EPS of $1.09 on revenue of $7.19 billion in the same quarter last year.

Nvidia stock has been on a tear over the last year, rising over 200%. The stock has risen nearly 700% since the stock market lows in October 2022. Shares closed at a record high on Tuesday.

The vast majority of Nvidia’s revenue will come from its Data Center business, which is set to pull in $21 billion, up from $4.28 billion in Q1 last year.

The company’s Gaming division, formerly its largest segment, is expected to see revenue of $3.5 billion, up from $2.24 billion in the same quarter last year.

Ahead of Nvidia’s earnings announcement, Stifel analyst Ruben Roy raised his price target on the company’s share price to $1,085 from $910, saying that he anticipates Nvidia will once again beat expectations on the top and bottom lines and raise its guidance for the next quarter.

Demand for its chips from hyperscalers like Amazon (AMZN), Google (GOOG, GOOGL), Meta (META), Microsoft (MSFT), and others has boosted the company’s results, making Wednesday’s report a key check on the industry’s appetite for further AI investment.

And as Yahoo Finance’s Josh Schafer reported Tuesday, the AI trade has moved beyond the borders of tech, with investors looking to energy and power companies as derivative plays on the AI boom.

But Roy, like analysts at BofA Global Research and Loop Capital, says there remain near-term concerns about how much the transition from Nvidia’s current Hopper line of AI chips to its Blackwell line will impact overall sales.

The fear is that customers will put some of their orders for Hopper chips on hold while they wait for Nvidia to roll out its more powerful Blackwell products. The Financial Times reported Tuesday that Amazon had paused some orders from Nvidia as it waits for more advanced Blackwell chips to be made available.

Loop Capital’s Ananda Baruah argued it’s possible Nvidia won’t let companies put their Hopper orders on hold without losing their place in line to purchase Blackwell chips. If enough customers put their orders on hold in favor of Blackwell chips, Nvidia could see a temporary dip in quarter-over-quarter sales.

NVIDIA’s CEO Jensen Huang displays products onstage during the annual Nvidia GTC Artificial Intelligence Conference at SAP Center in San Jose, Calif., on March 18, 2024. (JOSH EDELSON/AFP via Getty Images) (JOSH EDELSON via Getty Images)

Nvidia is also contending with the threat of its customers building their own in-house AI chips.

So far Amazon, Google, and Microsoft are using — or are working toward — their own AI chips that provide better power efficiency than Nvidia’s offerings.

That doesn’t mean those companies will completely abandon Nvidia’s chips, though the push to their own products could cut into the chip giant’s market share. AMD (AMD) and Intel (INTC) are gaining steam when it comes to their own AI chips.

On Tuesday, Microsoft announced during its Build conference that it would begin offering AMD’s MI300X chips for developers looking to train and deploy AI models. The Windows maker also made sure, however, to point out that it is using Nvidia’s chips as well.

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Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.

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