Aug 28, 2024, 12:00 AM
Aug 28, 2024, 12:00 AM

Nvidia faces high expectations for earnings report

Highlights
  • Nvidia's earnings growth is decelerating, with projections indicating a decline from previous triple-digit growth rates.
  • The company's earnings surprises are shrinking, and its impact on the S&P 500's earnings growth is diminishing.
  • The outlook for Nvidia depends on sustained AI spending and the ability to innovate amid potential product delays.
Story

Nvidia is facing increasing pressure to meet high expectations from Wall Street, as investors have come to expect consistent earnings beats and raises. Recent trends indicate a deceleration in the rate of change in Nvidia's earnings growth, with projections showing a decline from triple-digit growth rates. Analysts note that while earnings are still increasing, the growth rate has been diminishing, which raises concerns about the company's ability to maintain its previous performance levels. The forward earnings multiple for Nvidia has risen significantly, indicating that investors are willing to pay more for future earnings, but this also suggests heightened expectations. The company's earnings surprises have been shrinking, with the latest reports showing a decrease in the percentage of earnings beats compared to previous quarters. This trend could signal that Nvidia may struggle to impress investors in the upcoming earnings report. Additionally, Nvidia's impact on the S&P 500's overall earnings growth is also declining, as the company is expected to contribute only 16% to the index's nearly 13% growth this quarter. Concerns about the sustainability of AI spending and potential delays in product launches, such as the Blackwell GPU, further complicate the outlook for Nvidia. Ultimately, the future performance of Nvidia hinges on the ongoing demand for AI technologies and the company's ability to innovate and deliver new products. The current market sentiment reflects a cautious optimism, but the challenges ahead could test Nvidia's resilience in a rapidly evolving industry.

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