High expectations in light of Nvidia Q3 results

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Nvidia, a prominent technology leader, has established itself as an undisputed benchmark in the field of computing. The company not only limits itself to the creation of powerful graphic cards but has also successfully ventured into fields such as artificial intelligence (AI), virtual reality, and autonomous driving, standing out as a driving force in digital transformation and the creation of cutting-edge technological solutions.

The numbers of Nvidia

Over this year, Nvidia has stood out as one of the strongest stocks in the financial market, experiencing a staggering 230% growth. This performance is even more impressive considering that, at the start of 2023, the company’s valuation was estimated at $364 billion, which has skyrocketed to $1.2 trillion today.

The key to Nvidia’s success lies in its dominant role in AI. The company’s graphic processing units (GPUs), critical for running compute-intensive workloads, have significantly driven sales. In the second quarter of fiscal 2024, Nvidia’s revenue increased 101% year-over-year to $13.5 billion. With estimates for the third quarter standing at $16 billion, analysts are projecting 171% growth.

In 2023, there is an impressive 122% increase in revenue projections for Nvidia’s Data Center segment in 2023, rising from $18 billion to a remarkable $39 billion. In contrast, a 20% decrease is seen in revenue expectations for AMD’s Data Center segment, falling from $8.2 billion to $6.6 billion. Similarly, forecasts for Intel’s Data Center and Artificial Intelligence segment have seen a 14% drop from $18.3 billion to $15.6 billion over the same period.

Nvidia stock’s popularity

Nvidia shares have been the focus of attention on the social networking platform Reddit due to its notorious rally for the year. While this stock has experienced significant growth, analyst consensus suggests that the company’s bullish streak is destined to be sustained. As a leader in the field of artificial intelligence, Nvidia stands out as the main beneficiary of this technological revolution. Its HGX platform and cutting-edge technology are recognized as key drivers in generative AI and advanced language models. 

The company is about to report its results for the third fiscal quarter, to which investors are expectant. Goldman Sachs five-star analyst Toshiya Hari said, “We expect strong fiscal third-quarter results and fourth-quarter guidance, as well as constructive forward-looking comments from management, to reinforce our bullish view on the stock.” Due to the strong hardware and software offerings and, primarily because of the speed at which the company continues to innovate, Hari believes Nvidia will maintain its position as the “industry standard.”

However, the future of Nvidia’s stock depends largely on meeting or exceeding expectations. The market anticipates impressive revenues with shares trading at 117 times trailing earnings. Projections point to sales of $17.7 billion for the fourth quarter, representing a challenging 193% year-over-year growth. Nvidia’s performance in upcoming reports will determine whether the company can maintain its lofty valuation, and expectations remain high, with earnings expected to rise 163% in the coming year.

Despite these high expectations, the market believes Nvidia could reach $550 per share before 2024. Uncertainty remains, however, and the stock could falter if fourth-quarter guidance falls short of expectations. Investors are keeping an eye on the results, aware that Nvidia’s future performance is intrinsically tied to its ability to stay ahead in an increasingly competitive market.

Is Nvidia’s stock a buy?

The positive outlook for Nvidia is based on its strong demand for accelerated computing and AI solutions, especially in the data center segment. In addition, the expansion of its enterprise portfolio and its strategic position to take advantage of growing demand from cloud service providers and consumer Internet companies strengthen its market position.

Although the average target price of the stock indicates a potential upside of 30.96% from current levels, the consensus supports the conclusion that Nvidia presents solid long-term prospects, as reflected by the “Strong Buy” rating by the specialists.

With 37 out of 38 analysts covering Nvidia stock strongly recommending buying, the company looks like a solid long-term investment. Third-quarter financial results, to be announced on November 21, are expected to further support Nvidia’s robust market position.

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(Information in this post is for general informational purposes only. It cannot and should not be considered as suggestions or recommendations regarding investing or financial decisions.)

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