Nvidia Q1 Earnings Preview: AI Boom May Mask the Slowdown of Chip Industry

Tiger Newspress2023-05-18
Nvidia expects fiscal Q1 revenue of $6.5 billion, plus or minus 2%. Morgan Stanley estimated that its annual AI inference revenue could potentially increase 10-fold to $5 billion in the next five years.

Nvidia is scheduled to announce Q1 earnings results after the market closes on Wednesday, May 24th.

Latest Results

Nvidia reported Q4 net income of $1.41 billion, or 57 cents a share, compared with $3 billion, or $1.18 a share, in the year-ago period. Revenue fell to $6.05 billion from $7.64 billion in the year-ago quarter.

Q1 Guidance

The company said it expects fiscal Q1 revenue of $6.5 billion, plus or minus 2%.

AI Inference Is Expected to Be a Major Growth Driver

According to management estimates, Nvidia is on track to target a $1 trillion addressable market opportunity by 2023, of which software is likely to account for $300-$400 billion--almost symmetrically distributed on AI Enterprise, Omniverse and DRIVE.

In the short term, NVDA disclosed at its shareholder/analyst conference on March 23, 2023, that it is "seeing stronger demand from hyperscale customers for all of data center platforms as they focus on generative AI".

For the long run, AI inference is expected to be a major growth driver for Nvidia Corporation. Morgan Stanley estimated that NVDA's annual AI inference revenue could potentially increase 10-fold to $5 billion in the next five years. Its forecasts are aligned with NVDA's comments at the recent March 23 shareholder/analyst conference on March 23 noting that generative AI will drive a "step function increase in the amount of inference workloads."

TSMC and AMD’s Results Showed a Mixed Picture for Nvidia

According to TSMC’s result, it has trimmed its 2023 revenue outlook.It expects annual revenue to decline in the low to mid-single digits as compared to the prior expectation of a slight improvement over 2022 levels. Though it fired a warning signal,the company saw solid growth in demand for its 5-nanometer (nm) chips.

Nvidia may have played a key role in this terrific growth as the company has been witnessing solid demand for its Hopper H100 graphics processing units (GPUs) amid the generative artificial intelligence (AI) boom.

But AMD’s guidance may show the opposite side, it guided for $5.3 billion in revenue for Q2, a 19% year-over-year decline. Management pointed to weakness in its client, gaming, and data center segments as the reason for the anticipated drop.

Just because AMD sees some weakness in its business doesn't mean Nvidia will. But Nvidia has shown signs of slowing down for multiple quarters now, so it seems that massive guidance from the company would be a surprise.

Analyst Opinions

HSBC analyst Frank Lee upgraded NVDA stock to to “buy” from “reduce” and increased its price target on NVDA to $355 from $175.Li noted that the company's pricing power in AI chips is likely to boost earnings considerably higher, and raised his fiscal 2024 and 2025 sales and earnings per share estimates to $33.37B and $43.14B and $5.11 and $7.10, respectively. 

BofA analyst Vivek Arya raised its price objective on Nvidia to $340 from $310 a share and offered a buy rating. The company sees a “crossover” this year leading to accelerator sales rising above $40 billion by 2025. This would mean at least a 37% compound annual growth rate from 2022 while x86 CPU sales grow at modest 3% CAGR, to $26 billion.

Piper Sandler analyst Harsh Kumar rates NVDA shares as Overweight and has a $320 price target. The company estimated that 80% of all AI workloads are currently run on NVDA chips. Kumar believes that the complete ChatGPT deployment stack on Azure relies on around 30,000 NVDA GPUs. 

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Comments

  • KPTan
    2023-05-18
    KPTan
    Tq for sharing 
  • FGTay
    2023-05-18
    FGTay
    Yas 
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