Nvidia earnings are key test for AI
Next week’s earnings from Nvidia will be a key test for markets and especially the cluster of AI related stocks that have rallied significantly this year. Nvidia reports FY24 Q2 (ending 31 July) earnings on Wednesday after the US market close with analysts expecting revenue of $11bn up 65% y/y and EBITDA of $6.3bn up from $924mn a year ago as demand for AI research and deployment has exploded since the successful launch of OpenAI’s ChatGPT. As we have highlighted in several notes it looks like it is especially Chinese technology companies that are driving the demand bonanza because China has realized that the country is behind on AI and has instructed their technology companies to catch up quickly. In fear of the Biden administration making further export restrictions Chinese technology companies are right now hoarding modified GPUs from Nvidia. So the key test is whether Nvidia is maintaining its fiscal year outlook or demand is already cooling after the initial splurge.
The other earnings releases next week are highlighted below.
- Monday: BHP Group, KE Holdings, Zoom Video
- Tuesday: Woodside Energy, Kuaishou Technology, ANTA Sports, Lowe’s, Medtronic, Baidu
- Wednesday: Nvidia, Analog Devices, Snowflake, Autodesk, Splunk
- Thursday: Royal Bank of Canada, Toronto-Dominion Bank, Meituan, CRH, Intuit, NetEase, Workday, Marvell Technology
Adyen’s sudden collapse
Nobody had seen it coming. Adyen was heralded as a leader in the payments industry with solid growth but yesterday’s shocking earnings release showed a significant miss on volume and EBITDA due to significant cost pressures and too much hiring in its North America business. Adyen shares are down 2.5% today adding to the 39% decline yesterday as the company’s long-term operating margin guidance has come into question over increased competition. The problem for shareholders is now to find out what is the long-term growth and more importantly margin. Compared to other payment stocks Adyen is still valued at a premium and thus there is still downside risk to the stock.