Earnings preview: Is the ’Intel moment’ coming for Nvidia? Earnings preview: Is the ’Intel moment’ coming for Nvidia? Earnings preview: Is the ’Intel moment’ coming for Nvidia?

Earnings preview: Is the ’Intel moment’ coming for Nvidia?

Equities 4 minutes to read
Peter Garnry

Head of Saxo Strats

Summary:  Nvidia reports earnings results on Tuesday after the US market close and will be the defining for sentiment not only on AI-related stocks but also the entire US technology sector. While analysts and investors are still bullish on the outlook the news yesterday from Microsoft and Tencent is potentially a warning of lower demand in the medium term. Microsoft is pushing ahead with its own purpose built AI chips expected for delivering already next year and Tencent announced that it had acquired significant inventory of AI chips from Nvidia suggesting that maybe a lot of demand has been frontloaded.

Updated (17 November 2023): Read our option strategist's take on Nvidia Investing with options: Nvidia - 3 long term scenarios

Is Microsoft doing to Nvidia what Apple did to Intel?

Nvidia has been this year’s hottest stock as generative AI has fuelled fever like sentiment not at least because of Nvidia’s phenomenal revenue guidance to the market in the previous two earnings releases. Nvidia reports FY24 Q3 results on Tuesday after the US market close with analysts expecting revenue of $16bn up 171% y/y and EBITDA of $10bn up from $1.07bn a year ago. It does not take much imagination to understand why investors are so excited about Nvidia and why there is so high anticipation of Nvidia’s earnings release. Never has there been a more important earnings releases defining an entire industry and setting the overall sentiment direction for a whole sector (US technology). Listen to yesterday’s Saxo Market Call podcast for more context about Nvidia earnings.

Everything is not rosy though. Yesterday, Microsoft confirmed that it is building its own bespoke AI chips specifically designed for generative AI model training. These new chips will be deployed in Azure data centres already next year which underpin the R&D and deployment of OpenAI’s ChatGPT and Microsoft’s Copilot. With Nvidia’s operating profit hitting an expected 57.1% in FY24 (ending 31 Jan 2024) it seems there is a lot to be saved for Microsoft if it can produce its own chips. The move feels a bit like the move Apple did against Intel on its iPhone and it is potential a key warning to Nvidia shareholders that naïve extrapolation cannot be done. Regardless of what happens it seems like semiconductor foundry businesses such as TSMC are the winners of the AI push.

Another worry for Nvidia shareholders should be the comment yesterday from Chinese internet giant Tencent saying that they have bought enough Nvidia chips to last ‘a couple of generations’ which means that Tencent now has the largest inventory of AI chips in China. In other words, there is a risk that a lot of the demand has been front-loaded which means that there will be a glut and maybe lower demand on the other side. It is interesting to note that Nvidia does not dare to put out an outlook more than 1-2 quarters out while sell-side analysts are willing to extrapolate current demand aggressively higher into FY27 (see chart below). What shareholders should consider is whether the generative AI industry really means 4x in Nvidia revenue in FY27 compared to FY23 or front-loading of demand is blurring the true normal demand?

Nvidia share price | Source: Saxo


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992