All eyes on Nvidia earnings in wait for results on AI boom or bubble: ‘Most important stock in the world’
Investors are starting to wonder if the AI craze has been overblown
All eyes are on chipmaker Nvidia this Wednesday as its quarterly earnings report is set to either exacerbate recent stock market jitters or offer a much-needed reprieve to investors. Concerns are mounting that the world's most valuable company could be at the apex of an artificial intelligence bubble on the verge of collapse.
Scheduled for release after market close, the report is widely seen as a crucial barometer for the AI boom, which ignited three years ago with the launch of OpenAI's ChatGPT. This technological breakthrough propelled Nvidia from a relatively obscure manufacturer of graphics chips for video games into a leading AI indicator, its specialised chipsets now considered vital for powering the burgeoning technology.
As OpenAI and longtime Big Tech powerhouses — such as Microsoft, Google, Amazon and Facebook parent Meta Platforms — buy more and more of Nvidia's chips, its annual revenue has soared from $27 billion in 2022 to a projected $208 billion this year. That rapid run-up has fueled a 10-fold increase in Nvidia's market value, which now stands at $4.5 trillion, surpassing Apple, Microsoft and Google parent Alphabet, currently valued in the $3 trillion to $4 trillion range.
“Saying this is the most important stock in the world is an understatement,” Jay Woods, chief market strategist of investment bank Freedom Capital Markets.
As the meteoric rise in its market value suggests, Nvidia has made a habit of reassuring investors with quarterly reports peppered with numbers surpassing analyst projections and salted with bullish comments from CEO Jensen Huang indicating the company remains in the early stages of a growth trajectory likely to last another decade despite challenges such as President Donald Trump's trade war.
But in the past few weeks, more investors are starting to wonder if the AI craze has been overblown, even as Big Tech companies like Alphabet increase their budgets for building more AI factories. That's why Nvidia's market value has fallen by more than 10% — a reversal known as a correction in investors' parlance — just three weeks after it became the first company to be valued at $5 trillion.
“Skepticism is the highest now than anytime over the last few years,” said Nancy Tengler, CEO of money management Laffer Tengler Investments.
Despite the recent worries, it's widely assumed that Nvidia's quarterly numbers will at least mirror the analyst forecasts that steer investor reactions. The Santa Clara, California, company is expected to earn $1.26 per share on revenue of $54.9 billion, which would be a 59% increase from the same time last year.
But the bar has been raised so high for Nvidia and AI that the company will likely have to deliver even more robust growth to ease the bubble worries. Investors also are likely to be parsing Huang's remarks about the past quarter and the current market conditions — an assessment that has become akin to the State of the Union for the AI boom.