Nvidia (NVDA) doesn’t report earnings until May 22. But the report is already shaping up as critical for the stock.
Analysts see the company reporting earnings of $5.13 a share for the quarter, up from just 88 cents a share in the same quarter of 2023.
But the short-term earnings numbers aren’t what’s most important right now. Nvidia has roughly 90% share in the market for AI-accelator chips. That’s put a big target on the company’s back. No one expects Nvidia to maintain that 90% share–which is okay since the market is growing so fast. Last month, analysts at Bank of America said the market could reach anywhere between $250 billion and $500 billion over the next three to five years. That was a big jump from their earlier estimate of less than $250 billion.
The question is How fast all the efforts to compete with Nvidia will eat into that market share.
I’m hoping that Nvidia will drop a clue or two in its quarterly conference call. And I don’t think I’m alone. The stock, one of the great growth and price momentum stories of the last year, has been uncharacteristically “meh” for the last month with a loss of 0.45%. (The stock is still up 76% for 2024 as of the close on April 9.) I own shares in my 50 Stock Portfolio.
But there has been a steady stream of news from competitors. For instance, today, April 9, Alphabet (GOOG) unveiled its latest in-house chip, Axion, that is designed to handle more artificial intelligence-related workloads and to cut its reliance on Nvidia. The chips are based on designs from Arm (ARM) and, Alphabet says, provide a 30% increase in performance compared to similar Arm-based chips for the cloud. Cloud computing and AI competitors Amazon (AMZN) and Microsoft (MSFT) have also created their own processors.
Axion chips will be available to external customers later this year.
In the nearer term look to earnings reports from Intel (INTC) on April 25, and Advanced Micro Devices (AMD) on May 7 for other clues on the AI and Cloud chip market. Advanced Micro might be the most volatile on the news since the company has recently announced its newest round of Nvidia-competitive chips. Analysts expect the company to report 41 cents a share in earnings for the quarter against 43 cents a share in 2023.
