OpenAI's Magical Projections and NVIDIA's Upcoming Earnings Report

Before focusing on this week's major events, let's discuss a company taking "magical thinking" to the extreme: OpenAI. Recent long-term revenue and profit forecasts for the company were reported. The most critical detail is that in 2025, the operating costs for OpenAI's AI models quadrupled, causing its gross margin to drop to 33%, significantly lower than the previously projected 46%. This is truly startling.

Admittedly, OpenAI's revenue slightly exceeded expectations, reaching $13.1 billion. However, if OpenAI were a typical public company, the market would react harshly to such a disappointing gross margin and the reality that cash burn through 2030 is projected to be more than double prior estimates. Investors would likely engage in heavy selling. But the reality is that OpenAI is a private company, and its shares are not freely tradable. Many investors remain convinced that OpenAI is an industry titan and that profits will eventually materialize. The question is, how will this be achieved?

According to reports, OpenAI anticipates a turning point in 2030: revenue is expected to grow by approximately $100 billion, a 54% increase over the total revenue projected for 2029. Free cash flow is forecast to turn positive, reaching $90 billion. These assumptions are based on a projected substantial decrease in model training costs of around $28 billion by 2030, which would fully offset the continued rise in model inference costs. OpenAI might have reasons to believe that models won't require such extensive training by then, but these figures seem almost too convenient. It's no wonder short-seller Jim Chanos stated on platform X, "These five-year AI forecasts are just guesses."

**This Week's Earnings Preview** Keep Wednesday clear. NVIDIA, Salesforce.com, Snowflake, and Zoom are all scheduled to report their January quarter earnings this week – surprisingly, all four companies chose the same day for their releases.

NVIDIA is highly likely to post impressive results: data from S&P Global Market Intelligence shows analysts expect January quarter revenue to reach $65.685 billion, a 67% year-over-year increase, with growth accelerating by several percentage points compared to the third quarter. For a company of NVIDIA's size, sustaining accelerating growth is no small feat! This might lead investors to reassess NVIDIA's stock price, which has been stagnant for months.

**Concerns for Software Stocks** Typically, NVIDIA's earnings would be the most anticipated this week, but the situation may be different now. Fears that AI will "destroy" the software industry have caused software stocks to plummet 20% to 30% this year (cybersecurity stocks also suffered a significant drop last Friday). Undoubtedly, some of this panic is overblown. Established companies hold significant advantages with existing customer relationships, making it difficult for clients to switch easily. As Evan Skopen, a partner at Lead Edge Capital, mentioned in a recent interview, "If you ask a large enterprise, 'Hey, can you replace Workday with a cheaper alternative?' they have zero interest." He noted that software constitutes a minimal portion of large enterprises' operational expenditures, and these companies are "not going to try flashy new solutions."

Furthermore, most legacy software companies have already integrated new AI tools into their products. Frankly, widespread enterprise adoption of these tools is still years away, so the current quarter's earnings reports will only offer a glimpse, with varying degrees of impact.

* Salesforce.com: Has begun disclosing the annualized revenue run rate from new AI products. Last December, its flagship product, Agentforce, reached an annualized revenue run rate exceeding $500 million in the third quarter. Updates to this figure will be closely watched this week. * Snowflake: With a revenue scale about one-tenth of Salesforce.com's, it announced an AI-related annualized revenue run rate of $100 million last December. For both companies, this figure is currently minor but worth monitoring. * Zoom: Executives have been vocal about transforming the video conferencing service into an "AI-first platform" but have not disclosed specific financial data. However, Zoom stands out among software stocks. It experienced explosive growth during the pandemic, but growth has nearly stalled since 2022, with annual revenue growth of only 3% to 4% over the past three years. Notably, despite sluggish stock performance in recent years, Zoom has avoided the "crash" seen in Software-as-a-Service (SaaS) stocks, with its share price actually increasing by 4.5% year-to-date.

Below are the analyst expectations for this week's reporting companies, provided by S&P Global Market Intelligence:

Company | Earnings Date | Revenue Expectation | YoY Change | EPS Expectation | YoY Change ---|---|---|---|---|--- NVIDIA | Wednesday | $65.685B | +67% | $1.46 | +64% Salesforce.com | Wednesday | $11.18B | +11.9% | $1.57 | -10% Snowflake | Wednesday | $1.255B | +27% | -$0.97 | (vs. -$0.99 prior year) Zoom | Wednesday | $1.233B | +4% | $0.85 | -27%

**Other Significant News**

* **E-commerce Stock Performance:** E-commerce stocks like Amazon and Shopify rose last Friday after the U.S. Supreme Court rejected a Trump-era tariff policy. Shopify gained over 5% intraday, while Amazon rose approximately 2%. * **Microsoft Executive Changes:** Microsoft announced on Friday that Xbox CEO Phil Spencer and President Sarah Bond will both step down and leave the company. They will be succeeded by Asha Sharma, President of Microsoft's CoreAI division, which builds AI tools for developers. * **Trump Pressures Netflix:** Former President Donald Trump called on Netflix to remove former Biden administration official Susan Rice from its board, "or face the consequences." This followed Rice's comments on a podcast about an "accountability agenda" for law-breaking companies if Democrats regain House control in the fall. This threat could complicate regulatory approval for any potential Netflix acquisition of Warner Bros. Discovery's streaming assets or film studio. * **OpenAI and Musk Exchange Views:** OpenAI CEO Sam Altman stated that the idea of building data centers in space currently is "utterly ridiculous," directly countering arguments made by competitor Elon Musk regarding a potential merger and public listing for SpaceX and xAI.