Nvidia’s recent sell-off appears to be nearing its end as the stock’s downward spiral has slowed down. Despite a significant drop of 23.5% at one point, Nvidia has been experiencing a positive momentum in August, with a remarkable 25% surge. This upward trend is expected to continue after August 28, driven by three key factors.
Firstly, Nvidia is anticipated to deliver impressive Q2 results, surpassing its own revenue outlook of “$28.0 billion, plus or minus 2%.” Analysts from Wall Street, who have estimated an average Q2 revenue of $28.6 billion, believe that Nvidia’s initial projection was conservative. The demand for the company’s graphics processing units (GPUs) has been underestimated by both Nvidia and Wall Street in the past. In the previous quarter, Nvidia’s actual revenue of $26 billion exceeded its own projection by 8.3%. It is highly likely that similar outcomes will be seen in the upcoming Q2 results, with the company also surpassing the average analysts’ adjusted earnings estimate of $0.64 per share.
Secondly, Nvidia is expected to provide stellar guidance for the next quarter during its Q2 update. This prediction is supported by the recent statements of major Nvidia customers, including Alphabet, Amazon, Microsoft, and Meta Platforms. These tech giants have indicated that their capital expenditures will increase to expand their artificial intelligence (AI) infrastructure. Alphabet CEO Sundar Pichai’s remark, emphasizing the risk of under-investing, suggests a positive outlook for Nvidia shareholders. Given that Alphabet recognizes this risk, it is reasonable to assume that other major customers share the same sentiment.
Lastly, concerns regarding the potential delay in the launch of Nvidia’s new Blackwell GPUs have cast a shadow over the company. Any postponement in shipping these chips could hinder Nvidia’s revenue growth. However, the main issue for investors lies in the uncertainty surrounding the situation. While it is not certain whether there will be a delay, Nvidia is expected to address these concerns and provide clarity during its Q2 conference call. The company will likely strive to alleviate fears and emphasize the pent-up demand for the new architecture. Once investors digest the news, they are likely to adjust their expectations accordingly, understanding that any delay would be temporary.