Computer chipmaker Nvidia is poised to release a quarterly earnings report today that is expected to either deepen a recent downturn in the US stock market or prompt a sigh of relief among investors increasingly worried that the world’s most valuable company is perched atop an artificial intelligence bubble that’s about to burst.Nvidia’s report, due after the US market closes at 8am AEST, has turned into a pulse check on an AI boom that began three years ago when OpenAI released ChatGPT.
That breakthrough transformed Nvidia from a mostly under-the-radar chipmaker — best known for making graphics chips for video games — into an AI bellwether because its unique chipsets have become indispensable for powering the technology underlying the craze.
Traders James Bodner, foreground, and Chris Lagana work on the floor of the New York Stock Exchange ahead of Nvidia releasing its results today. (AP)
As OpenAI and longtime “big tech” powerhouses — such as Microsoft, Google, Amazon and Facebook parent Meta Platforms — buy more and more of Nvidia’s chips, its annual revenue has surged from $US27 billion ($41 billion) in 2022 to a projected $US208 billion this year.
That rapid run-up has fuelled a 10-fold increase in Nvidia’s market value, which now stands at $US4.5 trillion, surpassing Apple, Microsoft and Google parent Alphabet, currently valued in the $US3 trillion to $US4 trillion range.
“Saying this is the most important stock in the world is an understatement,” Jay Woods, chief market strategist of investment bank Freedom Capital Markets.
Elon Musk speaks with Nvidia CEO Jensen Huang as they attend the Saudi Investment Forum at the Kennedy Centre in Washington today. (AP)
As the meteoric rise in its market value suggests, Nvidia has made a habit of reassuring investors with quarterly reports peppered with numbers surpassing analyst projections and salted with bullish comments from chief executive Jensen Huang indicating the company remains in the early stages of a growth trajectory likely to last another decade despite challenges such as President Donald Trump’s trade war.
But in the past few weeks, more investors are starting to wonder if the AI craze has been overblown, even as big tech companies such as Alphabet increase their budgets for building more AI factories.
That’s why Nvidia’s market value has fallen by more than 10 per cent — a reversal known as a correction in investors’ parlance — just three weeks after it became the first company to be valued at $US5 trillion.
“Skepticism is the highest now than anytime over the last few years,” said Nancy Tengler, chief executive of money management Laffer Tengler Investments.
Despite the recent worries, it’s widely assumed that Nvidia’s quarterly numbers will at least mirror the analyst forecasts that steer investor reactions.
The Santa Clara, California, company is expected to earn $US1.26 per share on revenue of $US54.9 billion, which would be a 59 per cent increase from the same time last year.
But the bar has been raised so high for Nvidia and AI that the company will likely have to deliver even more robust growth to ease the bubble worries.
Investors also are likely to be parsing Huang’s remarks about the past quarter and the current market conditions — an assessment that has become akin to the State of the Union for the AI boom.
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