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The AI Stocks Faces Its First Major Test With Nvidia Earnings

The poster child for AI frenzy stocks, Nvidia, reports earnings this week.

The stakes are high ahead of this week’s earnings report—not just for Nvidia, but for the broader market.

Many analysts have turned bullish on the stock. Meanwhile, Nvidia’s big gains have contributed to more than a tenth of the S&P 500’s rise through July, according to S&P Dow Jones Indices.

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Factset Chart on Nvidia

The shares are up around 4% this morning and have almost tripled this year.

Nvidia NVDA stunned Wall Street three months ago with a revenue forecast that blew past expectations, sparking a share price rally and a surge in investor enthusiasm for companies developing artificial intelligence technology.

That enthusiasm faces its first major test Wednesday when the chip maker is scheduled to report fiscal second-quarter results.

Nvidia added nearly $184 billion in market value on May 25, the third-largest one-day gain by any company in U.S. market history, according to Dow Jones Market Data.

The day before, the company said it expected to book about $11 billion in revenue during the quarter ended in July, versus the consensus estimate of about $7 billion.

Nvidia shares have nearly tripled in 2023, making it the S&P 500’s best performer. The stock now commands a premium valuation. It trades at 20 times forward sales estimates and 42 times forward earnings, according to FactSet.

The S&P 500 trades at 2.3 times sales and 18.6 times earnings.


Image: Nvidia