Nvidia earnings: OpenAI drama, record high stock price set the table for key report

Nvidia (NVDA) is set to report third quarter earnings after the bell on Tuesday as Wall Street eagerly awaits an update on the fundamentals behind the artificial intelligence hype cycle.

This report comes after the stock closed at a record high of $504.09 per share on Monday, with AI once again becoming the story of the moment for investors amid the ongoing drama surrounding Sam Altman’s departure from ChatGPT maker OpenAI and his move to join Microsoft (MSFT).

Expectations for the chip giant remain elevated as the company has become the face of the 2023 AI story.

Here’s what Wall Street expects of Nvidia in the quarter, as compiled by Bloomberg, versus how it performed in the same quarter last year.

Revenue: $16.1 billion expected versus $5.93 billion in Q3 last year
Adjusted EPS: $3.36 expected versus $0.58 in Q3 last year
Data center revenue: $12.82 billion expected versus $3.83 billion in Q3 last year
Gaming revenue: $2.7 billion expected versus $1.57 billion in Q3 last year

Investors will also be focused on the company’s revenue outlook, with Wall Street expecting fourth quarter guidance to come in at $17.8 billion. Revenue guidance is where the company has surprised investors most in 2023.

In August, the stock hit an all-time high after Nvidia reported second quarter results that smashed Wall Street’s expectations on both revenue and earnings per share, as well as guidance that exceeded lofty estimates. Back in May, one analyst referred to the company’s forecast as “guidance for the ages.”

“We expect NVDA to beat/raise consensus when it reports on Nov. 21,” Bank of America research analyst Vivek Arya wrote in a note previewing the earnings release. The firm remains positive on the stock, calling the valuation “compelling” and noting seasonal trends remain favorable.

But the stock stumbled for a few months following its August report as investors began to question Nvidia’s valuation, while updates on chip restrictions in China also challenged assumptions about the ultimate size of the market the company may be selling into.

In an SEC filing after the announcement, the company said it does not expect a near-term impact from the new restrictions. Stifel analyst Ruben Roy told Yahoo Finance Live he expects similar commentary from Nvidia on Tuesday.

“We think that there’s quite a bit of demand globally, ex-China,” Roy said. “So, certainly, in the US, the big cloud service providers … we think that’s going to continue to be a very big opportunity for Nvidia going forward. But even outside of the US and in areas like Europe, Japan, South Korea, you name it, there’s a lot going on with AI … Nvidia remains, in our view, the best way to position for that growth.”

Nvidia has been a driver of momentum in the stock market this year as a key member of the “Magnificent Seven” stocks — along with Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), and Tesla (TSLA).

Together, these stocks have gained more than 70% this year through mid-November against a 6% rise for the remaining 493 stocks in the S&P 500.

Evercore ISI senior managing director Julian Emanuel noted on Sunday that “it’s still NVDA’s world,” and warned investors to be ready for “post-NVDA volatility” no matter which way the stock swings.