Wall Street has high expectations for Nvidia's earnings report on Wednesday, but production constraints could be a spoiler for the fabless chipmaker. Meanwhile, NVDA stock surged after the artificial intelligence kingpin received a pair of bullish reports.
On Monday, investment bank HSBC reiterated its buy rating on NVDA stock and upped its price target to 780 from 600. Also, KeyBanc Capital Markets kept its overweight rating and raised its price target to 620 from 550. NVDA stock jumped 8.5% to close at 469.67 on Monday.
In morning trades on the stock market today, NVDA stock notched an all-time high of 481.74 before retreating. Nvidia ended the regular session Tuesday down 2.8% to 456.68.
Wedbush Securities analyst Daniel Ives said investors will be interested in hearing what Nvidia Chief Executive Jensen Huang has to say on Wednesday about demand for AI semiconductors, software and services. In a note to clients Sunday, Ives called Huang the "Godfather of AI."
Investors 'Laser Focused' On Company's View
"With a tech market shaky post Q2 earnings season (and) with a Big Tech sell-off still in motion, the Street is laser focused on Nvidia's guidance and Jensen's commentary to get more direction on the true demand and growth trajectory of the AI Revolution into year-end and 2024," Ives said. Wedbush rates NVDA stock as outperform with a price target of 490.
In a note to clients, KeyBanc analyst John Vinh said he believes Nvidia will deliver fiscal second-quarter results and an outlook "meaningfully above consensus expectations." That's despite a tight supply from its contract manufacturers.
However, Nvidia likely got incremental capacity at chip foundry Taiwan Semiconductor Manufacturing in the period, Vinh said. The delay of rival AMD's MI300X AI processor allowed Nvidia to gain production capacity at Taiwan Semi, he said.
Also, Nvidia found additional capacity at Amkor Technology, a semiconductor product packaging and test services provider, Vinh said.
NVDA Stock Hangs On Outlook
Analysts polled by FactSet predict Nvidia will earn $2.08 a share on sales of $11.19 billion in the July quarter. That would translate to year-over-year growth of 308% in earnings and 67% in sales amid red-hot demand for Nvidia's AI chips.
Rosenblatt Securities analyst Hans Mosesmann believes demand will exceed supply at Nvidia "by at least 50%" over the next several quarters. In a note to clients last week, Mosesmann reiterated his buy rating on NVDA stock. He also hiked his price target to 800 from 600.
Jordan Klein, managing director for tech, media and telecom sector trading at Mizuho Securities, said investors should temper their expectations for Nvidia's near-term outlook.
"Nvidia is massively capacity/supply constrained in data center (products), so their ability to guide materially above (analyst estimates) is highly unlikely," Klein said in a note to clients Monday.
Nvidia Is On 2 IBD Stock Lists
NVDA stock is on IBD's Leaderboard and Tech Leaders lists. Nvidia ranks third out of 36 stocks in IBD's fabless semiconductor industry group, according to IBD Stock Checkup. Further, it has an IBD Composite Rating of 96 out of 99.
IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
