NVIDIA earnings preview NVIDIA earnings preview NVIDIA earnings preview

NVIDIA earnings preview

Junvum Kim

Sales Trader

Summary:  NVIDIA (NVDA) reports 1Q earnings tomorrow morning after US market closes. The obvious area to watch would be the AI hype that has been building up this year and its data center number as it accounts 60% of the total revenue.


While daily debt ceiling talk updates are ongoing focus, a number of chip stocks continue to make headlines with the latest being Broadcom (AVGO) getting a new multiyear deal with Apple for 5G radio frequency components last night.  Both AVGO and QCOM rely heavily on AAPL with sales accounting 20% and 22% respectively, but when it comes to AI related GPU, NVDA and AMD are the leading stocks alongside Intel that is also hoping to enter the AI bandwagon.

NVIDIA (NVDA) reports 1Q earnings tomorrow morning after US market closes followed by the earnings call at 5am SGT and the obvious area to watch would be the AI hype that has been building up this year and its data center number as it accounts 60% of the total revenue.  The gross margin is expected to be one of the main bright spot while free cash flow should be the record number reaching nearly $3b.  The option trading volume has been fading last two days compared to the 20 day average of 773,328 but calls continue to dominate puts marginally while open interest favors puts over calls.  ATM implied vol for 26 May expiry is nearly 100 doubling the other ones post the earnings and there is no OTM skew between calls and put.

Top 10 most active options that expires this Friday and call options C340 & C330 near all time high seem to be popular strikes maybe linked to potential covered call setups.

Name

Last

PxChg

Px%Chg

Vol

Volm%Chg

OInt

OI%Chg

IVM

IV%Chg

Ntnl

Mny

Delta

NVDA US 05/26/23 C315

7.20

(2.08)

(22.41)

10,024.00

(27.44)

7,822.00

16.75

95.33

15.91

307,656,529.69

102.63

0.40

NVDA US 05/26/23 P267.5

0.44

0.04

10.00

8,933.00

884.90

2,062.00

3.15

89.83

8.30

274,171,566.21

87.16

(0.04)

NVDA US 05/26/23 C310

9.10

(2.55)

(21.89)

8,929.00

34.33

9,010.00

10.24

95.03

15.73

274,048,798.24

101.00

0.47

NVDA US 05/26/23 P270

0.54

0.06

12.50

8,435.00

112.95

11,887.00

14.02

89.02

9.50

258,886,954.10

87.97

(0.05)

NVDA US 05/26/23 P310

11.95

2.35

24.48

7,986.00

30.88

3,572.00

27.16

93.05

14.93

245,106,249.61

101.00

(0.53)

NVDA US 05/26/23 P295

4.93

1.16

30.77

7,963.00

136.92

6,270.00

21.32

90.00

13.45

244,400,333.79

96.12

(0.30)

NVDA US 05/26/23 C320

5.55

(1.78)

(24.28)

6,673.00

(21.11)

7,290.00

11.40

95.98

15.97

204,807,663.87

104.26

0.33

NVDA US 05/26/23 C340

1.85

(0.67)

(26.59)

6,191.00

23.28

7,358.00

5.48

99.41

15.23

190,014,123.63

110.78

0.14

NVDA US 05/26/23 P290

3.42

0.83

32.05

6,044.00

(8.77)

6,989.00

50.08

89.16

13.14

185,502,400.78

94.49

(0.23)

NVDA US 05/26/23 C330

3.30

(1.10)

(25.00)

6,007.00

(20.70)

10,661.00

12.54

97.26

15.78

184,366,797.07

107.52

0.22

1Q

  • Revenue estimate $6.52 billion (Bloomberg Consensus)
    • Data center revenue estimate $3.91 billion
    • Gaming revenue estimate $1.98 billion
    • Professional Visualization revenue estimate $246.6 million
    • Automotive and Embedded rev. estimate $309.9 million
  • Adjusted gross margin estimate 66.6%
  • R&D expenses estimate $1.91 billion
  • Adjusted operating expenses estimate $1.78 billion
  • Adjusted operating income estimate $2.57 billion
  • Adjusted EPS estimate 92c
  • Free cash flow estimate $2.94 billion

2Q

  • Revenue estimate $7.18 billion
  • Adjusted gross margin estimate 66.9%
  • Adjusted operating expenses estimate $1.82 billion

Earnings reactions

  • Implied 1-day share move following earnings: 4.7%
  • Shares rose after eight out of 12 prior earnings announcements.
  • Adjusted EPS beat estimates in 11 of past 12 quarters.

16 stocks under semiconductor sector listed in NASDAQ 100 sorted by forward PE ratio with NVDA’s competitors in bold.  NVDA not only has the highest forward PE of 61 within the sector, but also seventh highest in the index (higher than TSLA’s 47 times) hence the stock is only 7.78% off all time high $346.47.  Given strong growth expectations for current FY with revenue 12% YoY and adj EPS 38% YoY, high PE isn’t expected to be a major concern for the investors even though profit taking or some minor pull backs cannot be ruled out in the near term as 200 DMA is sitting at $193.52 as a reference point.

Ticker

Name

52Wk High %

52Wk Low %

30D VOL

YTD return

Beta

Market Cap

Free cash flow

BEst P/E

NVDA

NVIDIA CORP

(3.58)

183.81

46.39

109.99

1.51

771,022,782,464

3,808,000,064

60.87

INTC

INTEL CORP

(34.32)

20.01

31.74

11.65

0.92

126,297,882,624

(19,909,000,448)

35.88

AMD

ADVANCED MICRO DEVICES

(2.59)

98.13

43.88

66.93

1.34

173,919,076,352

2,519,000,000

32.66

ASML

ASML HOLDING NV-NY REG SHS

(2.63)

87.65

27.46

24.72

1.42

281,648,496,640

9,132,199,808

31.25

MRVL

MARVELL TECHNOLOGY INC

(24.49)

37.60

49.56

25.38

1.60

39,794,434,048

1,082,600,000

27.08

GFS

GLOBALFOUNDRIES INC

(20.66)

56.26

35.81

6.74

1.30

31,672,172,544

(404,000,000)

23.40

TXN

TEXAS INSTRUMENTS INC

(8.89)

17.50

22.33

2.74

1.22

155,081,736,192

4,400,000,128

21.86

LRCX

LAM RESEARCH CORP

(4.46)

91.42

32.12

36.45

1.62

78,598,578,176

3,951,503,008

21.70

KLAC

KLA CORP

(3.44)

65.74

30.86

9.99

1.88

57,734,668,288

3,193,851,008

19.76

AMAT

APPLIED MATERIALS INC

(5.73)

75.04

31.06

27.84

1.34

106,949,738,496

5,913,000,064

17.39

ADI

ANALOG DEVICES INC

(5.21)

40.79

27.92

14.56

0.89

96,774,643,712

4,260,959,936

17.24

AVGO

BROADCOM INC

(1.79)

65.39

29.09

22.78

1.28

282,828,505,088

16,860,000,000

16.04

NXPI

NXP SEMICONDUCTORS NV

(11.71)

32.54

29.40

10.78

0.84

46,070,542,336

2,637,000,000

12.79

MCHP

MICROCHIP TECHNOLOGY INC

(11.55)

42.87

30.73

10.49

0.66

43,379,957,760

3,171,100,032

12.31

QCOM

QUALCOMM INC

(33.90)

1.60

28.59

(5.80)

1.31

117,281,923,072

6,853,999,872

11.26

MU

MICRON TECHNOLOGY INC

(12.17)

36.75

37.74

32.51

1.13

72,481,734,656

(1,948,999,936)

NA

 

Performance comparison since 23 March 2020 when S&P 500 made COVID low 2,191.86 and NVDA with near six-fold return even though INTC, AVGO and QCOM have decent dividend yield of 4.13%, 2.53% and 2.9% respectively.

Some information from generative AI (run by our GST intern JORN):

<Bard>

ChatGPT doesn't use physical chips directly. However, it is typically deployed and run on powerful hardware infrastructure consisting of high-performance servers equipped with CPUs (Central Processing Units) and GPUs (Graphics Processing Units) or TPUs (Tensor Processing Units).

During the training process, models like ChatGPT are trained on large-scale clusters of GPUs or TPUs to accelerate the computation required for training deep learning models. These chips are optimized for matrix operations and can handle the intensive calculations involved in training and running neural networks efficiently.

During the training phase of ChatGPT, clusters of Nvidia GPUs are often employed to accelerate the training process and handle the large-scale computations involved. These GPUs are specifically designed to efficiently perform matrix operations, which are fundamental to training neural networks.

 

<ChatGPT 4>

Dominant position in the AI chip market: Nvidia's 89% market share in the AI chip market provides a significant advantage, considering the rapid expansion of the AI sector. This positions Nvidia well for future growth opportunities.

Strong performance and growth prospects: Nvidia has a robust presence in the gaming and data center markets, which contribute significantly to its revenue. The consensus numbers project solid revenue for the first and second quarters, indicating expected growth.

High profitability: The estimated adjusted gross margin of 66.6% for the first quarter suggests a high level of profitability. This is a positive indicator for the company's financial performance.

High valuation: The financial ratios suggest that the stock may be overpriced. This high valuation raises the possibility of a correction if Nvidia fails to meet high investor expectations.

Political and macroeconomic headwinds: Ongoing tensions between the US and China could impact Nvidia's access to the Chinese GPU market. Additionally, a global economic slowdown could lead to reduced demand for electronics and components, affecting Nvidia's revenue.

Considering these factors, investors should exercise caution and closely monitor Nvidia's performance and market conditions. While the company has strong growth prospects and dominance in the AI chip market, the high valuation and potential challenges should be taken into account when making investment decisions. Conducting further research and staying updated on earnings reports and market developments will be crucial for informed decision-making.

The partnership between Nvidia and Microsoft for the cloud gaming platform GeForce Now, along with the inclusion of Xbox and Bethesda games, can be seen as a bullish indicator for Nvidia. It offers revenue potential, market expansion, and strategic advantages. By tapping into a wider user base and attracting gamers with popular titles, Nvidia has the opportunity to generate additional revenue and strengthen its position in the gaming industry. 

Return comparison
Historical earnings surprises

Quarterly Outlook 2024 Q2

2024: The wasted year

01 / 05

  • Macro: It’s all about elections and keeping status quo

    Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.

    Read article
  • FX: The rate cut race shifts into high gear

    As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.

    Read article
  • Equities: The AI and obesity rally is defying gravity

    Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.

    Read article
  • Fixed income: Keep calm, seize the moment

    With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.

    Read article
  • Commodities: Is the correction over?

    Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.

    Read article
Disclaimer

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 is not intended to and does not change or expand on this. 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/legal/disclaimer/saxo-disclaimer)
- Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)


Boulevard Plaza, Tower 1, 30th floor, office 3002
Downtown, P.O. Box 33641 Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. 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

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.