Sharemarket darling Nvidia (NASDAQ: NVDA) is projected to report some strong numbers this week, with the Company forecasted to deliver $5.52 per share compared to $4.55 in the previous quarter. However, with CEO Jensen Huang’s plans to offer the best AI chips in the game, established chipmakers like AMD and Intel as well as those developing in-house AI chips such as Amazon and Alphabet pose a significant threat to Nvidia’s dominance.

Nvidia’s Earnings (all currencies are in USD)

What to expect

With stocks having surged by nearly 10% on the earnings date in the previous earnings season, Nvidia is expected to deliver another record revenue and margin this week, having reaped significant rewards from the new era of technological revolution. The company’s fiscal year 2024 earnings report highlights a substantial surge in demand for its AI offerings.  The Data Centre segment, specialising in AI, experienced a remarkable 409% year-over-year revenue increase in the previous quarter and significantly contributed to the company’s full-year revenue, which surged by 126% year-over-year.

Looking ahead to the upcoming quarterly report, Nvidia is expected to report approximately $24 billion in total company revenue, reflecting a 9% increase from the previous quarter and a 234% increase year-over-year.

In terms of earnings per share (EPS), Nvidia is forecasted to deliver $5.52 per share in its upcoming report, compared to $4.55 per share in the previous quarter, representing a year-over-year change of +406.4%.

Areas to watch

Data centre

Driven by a surge in demand for data processing, training, and inference from major cloud service providers and GPU-specialised applications across various industries, Nvidia’s Data Centre is currently riding a wave of explosive growth. In the fourth quarter, revenue skyrocketed to a record $18.4 billion, marking a stunning 409% increase from a year ago. With anticipation high, the upcoming quarter is expected to deliver yet another record-breaking performance.

Margin

According to guidance from the previous quarter, Nvidia anticipates further improving its enviable margins from 72% in FY24 to 76%-77% in the first quarter of the new fiscal year.

Opportunities and Challenges

Jensen Huang, Nvidia’s CEO, apparently isn’t satisfied with the company he founded being just a hardware provider. The business model he envisions involves offering the best AI chips, packaged with top-tier networking kits and software. This approach allows Nvidia to leverage its dominant position in chip offerings while maintaining clients over extended product cycles.

However, Nvidia’s path ahead is certainly not without obstacles. Established chipmakers like AMD and Intel pose a significant threat, while major cloud providers like Amazon and Alphabet are developing in-house AI chips, potentially disrupting Nvidia’s dominance within their ecosystems. Additionally, recent US restrictions on AI chip exports to China, a key market representing nearly a quarter of Nvidia’s revenue, could reshape the landscape.

Further complicating matters are potential supply chain disruptions. Nvidia’s primary chip manufacturer, Taiwan Semiconductor Manufacturing Company (TSMC), recently announced production capacity limitations that could constrain Nvidia’s ability to meet market demand in the near future.

Nvidia’s share price

Nvidia’s stock price has surged over 95% year-to-date, and investor sentiment remains positive. According to IG data, 40 out of 42 analysts surveyed in the past three months rated Nvidia as a “strong buy,” with the remaining two recommending a “hold” position.