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Nvidia (NVDA) Q1-2024 Earnings Preview: High Expectations and Market Optimism

Source: Nvidia

Nvidia Earnings Preview – Q1-2024 

The big event is finally here (Post-market Wednesday, May 22nd) and expectations are sky-high! 

Consensus estimates are for earnings of $5.58 (up 412% YoY) and revenues of $24.6Bn, (up 242% YoY). However, analysts seem to be pointing out that anything less than $5.75 and $26Bn would lead to disappointments. Similarly, expectations for higher guidance for Q2 are also, well, high. Just meeting consensus estimates of $6 per share and $27Bn won’t cut it.

Wall Street remains optimistic – the average price target is $1,040 a 9% upside, with a high of $1,400 from Rosenblatt Securities, who believe that there won’t be any air pockets transitioning from the H(Hopper) series to the B (Blackwell) series, even as AWS this morning confirmed that they would wait for the Blackwell to ship before buying more Hoppers.

Other Wall Street analysts also have higher-than-average targets from $1,100 (Barclays) to $1,200 (Baird).

Seeking Alpha analysts, not to be outdone also talk of the large and growing TAM, with one estimate of $600Bn by 2030, extrapolating growth from the Chips Act, the massive Capital expenditures from mega-caps like Microsoft, Google, Meta, and Oracle, plus the partnership with Dell, new AI use cases and even proxying TSM’s manufacturing capacity. So yes, there are plenty of defensible theories about why this AI gravy train won’t slow down.

For my part, I last bought Nvidia for around $780 on April 22nd, and with a high exposure in it, don’t plan to add more for now. It should remain a very strong, high-conviction, core holding for a long time. I will be looking out for other AI stories.

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Semiconductors

Marvell Technology: Positioned for AI Growth but Priced for Perfection

source

Marvell Technology (MRVL) $74

Networking infrastructure – It had a down year, with cyclicality in China and slower data center growth. China is about 50% of revenues.

That said, the forecast for the next three years is good, with 24% revenue growth and 35 to 40% adjusted earnings growth. 

A lot of this is riding on growth from Nvidia and other AI investments in data centers. 

Like most companies in the sector Marvell has also appreciated 73% in the past year so valuations are a bit expensive, 11x sales, with cyclicality and China exposure, it’s definitely on the higher side. It has also financed its acquisitions with debt, carrying a lot of interest burden.

I would prefer to buy 10% lower in the mid sixties for a better return – there is an AI event on April 11th, which may have more specifics/catalysts. Will keep a look out for that.

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Market Outlook

Great Expectations: Tech Giants’ Solid Earnings Can’t Satisfy High Hopes

Great Expectations. Hi everyone. Sometimes, stocks get ahead of themselves.

Late Tuesday, three of the biggest names in technology—Alphabet, Microsoft, and Advanced Micro Devices—reported December quarter results and offered the latest updates on their AI progress.

While the headline numbers were generally solid, they weren’t good enough to impress investors given the stocks’ big runs.

Microsoft had the best quarter of the bunch, reporting earnings per share of $2.93, well ahead of the analyst consensus of $2.76. Alphabet beat profit estimates, posting EPS of $1.64 versus the consensus of $1.59. AMD’s profit was in line with the estimates, but the company’s revenue outlook was disappointing.

All three stocks were down in mid-day trading Wednesday. Alphabet shares dropped 6%, AMD slipped 3%, and Microsoft was down 1.4%. The tech-heavy Nasdaq Composite was off 1.6%.

The main problem with the reports wasn’t the numbers but the expectations going in. Take AMD’s AI chip outlook. On last night’s conference call with investors, CEO Lisa Su said that AMD now expects revenue for its AI data center MI300 GPU products to surpass $3.5 billion in 2024—up from a $2 billion forecast just three months ago. While the guidance is up significantly, some Wall Street analysts had estimates of up to $8 billion.

Investors would be wise to largely overlook these day-to-day stock movements. The technology companies’ conviction over future AI demand is more important. And, given the latest commentary about capital expenditure budgets, the robust trend is intact.

Microsoft said its expects capex to “increase materially” in the current quarter, and it intends to invest aggressively in the coming quarters. Alphabet said its capex would be “notably larger” in 2024 versus the prior year. Both companies said infrastructure investments are being driven by trends in AI demand.

There’s other evidence the AI arms race is still on beyond the comments from Microsoft and Alphabet. On Monday, Super Micro—a leading independent manufacturer of high-end AI servers for data centers— easily beat expectations and raised its full-year revenue guidance by nearly 40%. Last week, Nvidia CEO Jensen Huang told reporters in Taiwan that demand for AI GPUs is still outstripping supply, while adding 2024 is going to be a “huge year.”

Finally, Meta CEO Mark Zuckerberg boasted on social media earlier this month that his company will have 350,000 Nvidia H100 GPUs—and almost 600,000 H100 equivalent GPUs based on total computing power—by the end of this year.

We’ll find out more when Meta, Amazon, and Apple report on Thursday, but all signs suggest that AI spending is still accelerating—no matter what stocks said on Wednesday.