'Unmatched' Nvidia To Blow Past Q2 Estimates On AI Boost, Suggests Analyst: 'We See Limited Competitive Risks'

Zinger Key Points
  • Nvidia stock has gained over 196% year-to-date and is the top-performing S&P stock this year.
  • KeyBanc expects the chipmaker to report above-consensus Q2 results and see continued growth in the second-half.

Chipmaker Nvidia Corp. NVDA is among three chipmakers that are set to release their quarterly results this week, and an analyst at KeyBanc Capital Markets is upbeat about the company's performance.

Nvidia's fiscal year 2024 second-quarter report will drop in on Wednesday after the market close and a conference call to discuss the earnings is scheduled for 5 p.m. EDT.

The Nvidia Analyst: John Vinh reiterated an “overweight” rating and gave a $620 price target for Nvidia. Wall Street sentiment toward the stock is positive, given its unique and “unmatched position in preemptively monetizing generative AI trends,” and the risk/reward is also positive, the analyst said.

Nvidia's second half will likely show continued growth even off the massive second-quarter levels, given the still-limited industry capacity near term, said analyst Vinh.

The analyst noted accelerating AI demand trends and increased supply for chip-on-wafer-on-substrate, a high-density packaging technology for high-performance chips.

There is likely to be limited near-term impact from potential extended China export restrictions on data center GPUs as China demand will likely be backfilled with other customers' demand, the analyst said.

Vinh sees the upcoming non-CoWoS-based L40S ramp addressing the pent-up demand from China, given the competitive performance versus the A100 chip, attractive pricing, and being non-subject to export restrictions.

See Also: Best Artificial Intelligence Stocks

“NVDA remains uniquely positioned to benefit from AI/ML secular data center growth within the industry,” the analyst said.

“With significant barriers to entry created by its CUDA software stack, we see limited competitive risks and expect NVDA to continue to dominate one of the fastest growing workloads in cloud and enterprise.”

Q2, Forward Expectations: KeyBanc models second-quarter revenue and earnings per share of $12.7 billion and $2.49 per share, respectively. The current consensus calls for revenue and EPS of $2.07 and $11.17 billion, respectively.

For the third quarter, Vinh expects revenue of $14.8 billion, ahead of the consensus estimate of $12.5 billion. The bottom line will likely come in at $3, also ahead of the Street estimate of $2.35, he added.

Investors' Focus: KeyBanc expects investors to focus on the following:

Nvidia Price Action: Nvidia shares ended Friday's session down 0.10% at $432.99, according to Benzinga Pro data. The stock has gained over 196% year-to-date and is the top-performing S&P stock this year. In comparison, the iShares Semiconductor ETF SOXX has gained a little over 38%.

Read Next: Nvidia Flooded With AI Chip Orders From Oil-Rich Saudi Arabia, UAE In Race For Computational Sovereignty: Report

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