Top supplier of AI chips Nvidia will report results for the first quarter of the budget year after the market closes on Wednesday, with Wall Street expecting some slowdown after the previous blockbuster growth.
Still, the numbers for the quarter ending in April will be explosive as the data center chips used in generative artificial intelligence are still in high demand.
Analysts polled by FactSet see earnings per share rising 474% to $5.22, while revenue rises 241% to $24.5 billion. That would be less than the 765% profit increase and 265% revenue increase in the previous quarter.
Meanwhile, the stock is up 87% so far in 2024 and is up about 200% from a year ago. Nvidia is now the third most valuable company in the world, with a market capitalization of $2.3 trillion, trailing only Apple and Microsoft. But shares have been essentially flat over the past two months.
Nvidia’s March unveiling of its new Blackwell chip has prompted some analysts to expect a delay in the transition from its older H100 chips to next-generation models, which are expected to become publicly available later this year.
In a note Thursday, Bank of America analysts flagged this slowdown as a potential source of volatility in Nvidia stock after its earnings reports.
While BofA sees Nvidia reporting strong numbers compared to Wall Street consensus, analysts expect the company’s second-quarter expectations to mark the first time that sequential growth will be less than 10%.
Meanwhile, the company sees gross margins shrink from about 77% in the first quarter to a “more normalized” range of 75%-76% in the next quarter.
“But even if NVDA were to deliver on these bullish expectations, the stock could still react unfavorably as bears are likely to complain that: 1) NVDA’s quarterly revenue growth will slow to ‘just’ 7-8% quarterly in FQ2 (July) outlook, well below mid-teens or better the last few quarters, 2) [gross margin] Peaks and troughs are a sign of price pressure, an adverse mix (more Chinese H20 shipments and/or more inference units) and slowing demand/easing supply,” the note said.
BofA, for its part, is bullish on Nvidia, giving the stock a buy rating and a $1,100 price target, indicating an upside of 19% from Friday’s closing price.
Last month, Morgan Stanley analysts were also bullish on Nvidia, saying there were no signs of a lull in growth during the transition to the Blackwell chip, while underlying demand was still strong.
“NVDA continues to see strong spending trends in AI, with upward revisions to demand from some newer customers such as Tesla and several governments,” analysts wrote.
And despite increasing competition from Intel, Huawei, Samsung and others, Morgan Stanley expects Nvidia to maintain its market share.
“The pricing of Blackwell Generations appears to make a strong competitive statement, reducing enthusiasm for competitive offerings,” it added.
This story originally appeared on Fortune.com
