Nvidia (NASDAQ:NVDA) stock is one of the top-trending stocks on social media and is up slightly ahead of its second-quarter earnings, which it will post after the market closes today.
Analysts say that Nvidia’s results will not only be critical for itself but also for the artificial intelligence (AI) and semiconductor spaces. Moreover, the company’s results may impact the tech sector and the entire U.S. stock market. Yesterday, NVDA stock reached yet another all-time high.
NVDA Stock: The AI Boom, Q2 Guidance and Analysts
Nvidia has been by far the biggest beneficiary of this year’s AI boom, as the demand for its chips which are used to create AI, has soared. Indeed, Yahoo Finance recently reported that “tech firms of all sizes are doing everything they can to get their hands on Nvidia chips.”
And, in conjunction with its first-quarter results, the company provided Q2 revenue guidance of “$11B, plus or minus 2%,” versus analysts’ average estimate of only $7.18 billion. The intense demand for and high prices of its AI chips enabled the company to deliver a much better-than-expected outlook.
Also importantly, analysts, on average, predict that the company’s earnings per share soared 306% last quarter versus the same period a year earlier to $2.07.
Nvidia’s Impact on Other Stocks and Its Valuation
For much of the second quarter, Nvidia’s Q2 guidance sparked optimism towards AI-related names and semiconductors in particular and the tech sector in general. That bullishness, in turn, caused the entire stock market to boom.
If Nvidia again beats expectations by a wide margin later today, that exuberance could return, causing equities in general and tech names in particular to zoom higher. If, on the other hand, Nvidia reports in-line results or delivers numbers that come in below the mean estimates, NVDA stock could sink, dragging many tech names and the entire U.S. stock market down with it.
Also importantly, the valuation of NVDA stock is quite high at this point. as the shares have an elevated forward price-earnings ratio of 58. As a result, for the shares to rise meaningfully tomorrow, the chipmaker’s results will probably have to beat the average estimates by a significant amount.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
