Not long ago, Nvidia (NASDAQ:NVDA) traded at close to $300 a share in October. In hindsight, that month proved to be the start of a technology stock correction that took semiconductor stocks even lower. Ahead of its earnings report, Nvidia stock traded at well below the $200 level.
With that in mind, investors are wondering, what’s in store for NVDA stock after the company reports earnings on Thursday, Nov. 15?
At 31 times earnings, investors are in no mood to face any lowered expectations from Nvidia management. If the results from Advanced Micro Devices (NASDAQ:AMD) are any indication, Nvidia could disappoint investors, too. AMD said that lower demand from cryptocurrency mining hurt its GPU sales. And while Nvidia does not depend on this market, it could still disappoint investors for the same reason. An inventory correction that is hitting other chip stocks this past quarter could also force management to lower its forecast for the quarter ahead.
In its last quarter, NVDA had forecast crypto revenue falling to $100 million. Instead, actual crypto-related sales totaled $18 million. Going forward, NVDA did already warn investors that it saw negligible revenue from this market.
Already, Seagate Technology (NASDAQ:STX) warned in its quarterly report that demand for its enterprise drives would fall. This is due partly to the weakness in China. Western Digital Corporation (NASDAQ:WDC) also experienced demand weakness and pricing pressure for NAND-based storage. If sales of storage in enterprise and consumer markets are weak, it stands to reason that Nvidia may face the same headwinds.
Nvidia Stock and Weak GPU Sales
The company’s GTX 2080 product launch excited Nvidia stock investors at the time of the announcement. But sentiment for the GPU refresh changed when tech review sites said the higher price on the card did not justify the mediocre performance improvements. The negative review could hurt sales of the high-end gaming card in the quarter and for the next few quarters. Plus, if AMD comes out with a decent refresh on the Vega 56 and 64 models, NVDA’s market share growth would end.
In its last quarter, GPU sales grew an impressive 40% from last year to $2.66 billion. Thanks to Tegra processor sales, up 40% to $467 million, and gaming demand, Nvidia easily surpassed analyst expectations. Max-Q, which enables OEM and OMDC PC notebooks to run demanding games, drove GPU demand.
Nvidia said that the gaming market’s strength benefited its GPU card sales. Yet if Activision Blizzard (NASDAQ:ATVI) and Electronic Arts (NASDAQ:EA) are guiding lower revenue, then that bright outlook may change with Nvidia’s next forecast.
Bottom Line on NVDA Stock
Like it has in past quarters, Nvidia reported strong revenue from its supercomputing units. Pro Visualizations grew 20% last quarter. In Automotive, revenue rose to a record $161 million and up 13% from last year. Developments in autonomous driving continued, while higher computing power from its supercomputer, DRIVE Pegasus, encouraged customers to invest with Nvidia.
Chances are good that with investments from automobile manufacturers in ADAS continuing, Nvidia will report sales for its new Xavier Platform increasing for the months ahead. And this should get some Nvidia stock owners excited. After all, Xavier has 9 billion transistors and delivers 30 billion operations per second. All of this power takes little power: the system uses just one-third the energy of a light bulb.
In the datacenter space, Nvidia reported an increase in inventory in the last quarter but guided revenue growth of 3%. Still, demand will be driven by customer interest in the Volta platform. Plus, the Pascal platform is still benefiting from good demand.
As of this writing, Chris Lau did not hold a position in any of the aforementioned securities.