Nvidia is set to report its second-quarter earnings on Wednesday, in a first test of investor appetite since last week\u2019s mass AI-stock selloff.<\/p>\n
All eyes will be on the chipmaker\u2019s latest financials as the company sets the tone for the rest of the AI industry after a turbulent week in the sector. Several tech stocks saw shares tumble last week amid growing questions over whether AI-driven companies are being overvalued, including an MIT report that said 95% of AI pilots fail to grow company\u2019s revenues and statements from the OpenAI chief executive, Sam Altman, who said investors were possibly overhyping several companies.<\/p>\n
Nvidia, which became the first company to reach a $4tn market cap in July, saw a 3.5% drop in shares early last week \u2013 its biggest drop in months. Stocks recovered modestly by early Wednesday, in anticipation of the company\u2019s pivotal earnings report.<\/p>\n
Still, some analysts remain bullish on the so-called AI revolution, especially as major technology companies like Meta, Microsoft, Amazon and Alphabet are investing heavily in AI infrastructure.<\/p>\n
\u201cWe are still in the early days of the AI revolution as the use cases are just starting to massively expand as more companies recognize the value creation being driven by a handful of tech companies,\u201d said the Wedbush Securities analyst Dan Ives. Those companies include Nvidia, Ives said.<\/p>\n
\u201cThis week will be another flex the muscles moment for Jensen [Huang] and Nvidia as well as the AI revolution bull thesis,\u201d Ives said.<\/p>\n
Wall Street expects the company to post $1.01 in earnings per share on $46.05bn in revenue, according to Fact Set data.<\/p>\n
That\u2019s despite an expected hit to the company\u2019s bottom line from the restrictions on sales to China<\/a>.<\/p>\n Earlier this year, Trump banned AI chip sales in China, a move that resulted in a $4.5bn blow to Nvidia\u2019s finances during its fiscal first quarter. In August, the company agreed<\/a> to give the US government a 15% cut of its H20 chips to China in return for export licences. China, in turn, has voiced security concerns over the chips, and is ramping up production of its own domestic alternatives. Experts expect the restrictions to have some impact on the company\u2019s earnings.<\/p>\n Though Nvidia\u2019s chief executive, Jensen Huang, initially projected the company would lose $8bn in the second quarter due to the ban on China chip sales, that was before the company struck a deal with the US government. Analysts expect the company to continue to perform well but are wary of how these various external factors will affect the level of growth.<\/p>\n