Nvidia can't miss on earnings. Expectations are too high.

It may not be enough for the AI juggernaut to merely meet Wall Street estimates

Hello investors! If you’re new here, add your email below to get every edition of Opening Bell Daily in your inbox, free.

Today is the Super Bowl of earnings.

Nvidia reports quarterly results after-hours, and hype has been building for weeks.

Nearly every analyst expects another blowout victory for the chip giant — but odds of a surprise are rarely zero in markets.

The entire market is focused on one stock

Nvidia stock closed at a record high $953.86 per share Tuesday — nearly double its price from the start of the year. 

Led by CEO Jensen Huang, the company is on a rare run.

For multiple quarters in a row, it has raised its estimate and then beat that raised figure three months later. 

It’s also accounted for roughly 12% of the entire S&P 500’s return since last May. 

That said, expectations continue to climb.

Here’s what Wall Street forecasts in today’s report:

  • $24.6 billion revenue

  • $5.65 adjusted EPS

If those estimates hold, they would mark a 243% jump in sales growth compared to the same time last year. 

Still, hitting consensus forecasts might not cut it anymore.

Some analysts have floated that Nvidia needs to fall closer to $26 billion in revenue to meet investors’ increasingly lofty expectations. 

“If they miss either earnings or they fail to provide strong guidance I’d say look out below on this one,” said Dave Sekera, chief US market strategist at Morningstar. 

Whether Nvidia beats, bungles, or meets expectations, look for a big swing in its stock price.

The company has historically seen an average move of about 9% in either direction on first-quarter earnings days, according to Bespoke. 

So if the report is “average,” about $200 billion in market cap will either materialize or evaporate.

Bank of America analysts expect both robust earnings and volatile trading for a few reasons: 

  • Potential revenue dip ahead of Nvidia’s new Blackwell chip

  • Growing dependence on China

  • Less exciting company updates at the upcoming Computex conference 

Remember, the stock is already hovering at an all-time high. For most names, that would imply limited upside. 

Then again, everything is different with Nvidia. 

There’s virtually nothing it hasn’t over-delivered on since AI first broke into the mainstream with the launch of ChatGPT in late 2022.

Business is booming, demand is enormous, and Nvidia continues to serve as the North Star for the chip industry. 

However, while Nvidia’s indeed been on a hot streak, its margin of dominance is narrowing. 

In the last four quarters, the company has beat EPS expectations by smaller and smaller amounts. 

This type of slowing momentum usually matters to analysts. They even have a word for it: “second derivative analysis.”

“Markets clearly want to believe that NVDA is more than just a semi[conductor] stock,” DataTrek Research co-founders Nicholas Colas and Jessica Rabe wrote in a note.

“Essentially, investors believe that its competitive advantage in AI chip design is more than enough to offset classic ‘second derivative’ market psychology.”

*At a glance:

*Data as of Tuesday 8 p.m. ET

Elsewhere:

  • Fed Governor Christopher Waller doesn’t see rate hikes ahead. In a Tuesday interview, he said the Fed is still data-dependent, the latest inflation numbers do not warrant cuts, and “wait and see” remains the name of the game. (CNBC)

  • Biden wants to wrangle pump prices. The administration will release 1 million barrels of gasoline from its reserves ahead of the July 4th weekend and summer driving season. On Tuesday, gas prices nationwide averaged $3.59 a gallon, per AAA. (CNBC)

  • Microsoft stock touched a new high. The company debuted new PCs this week that include AI chips and a new Copilot software, which will run OpenAI’s GPT technology. So far this month, shares are up more than 7%. (Yahoo Finance)

Rapid-fire:

  • Eli Lilly stock hit a new high after a regulatory win in China (Reuters)

  • Amazon’s cloud computing arm halted orders of Nvidia’s “superchip” to wait for the newer model (FT)

  • Nvidia’s Huang says the partnership with Dell is key to expand into AI (Bloomberg)

  • Trump Media stock fell more than 9% after weaker-than-expected earnings (WSJ)

  • Shares of Macy’s climbed after the retailer posted strong earnings and raised its outlook (MarketWatch)

  • ASML and TSMC can reportedly disable chip-making machines if China invades Taiwan (Bloomberg)

Last thing:

Interested in advertising in Opening Bell Daily? Email [email protected]