Technology juggernaut Nvidia (NASDAQ:NVDA) — which manufactures the graphics processing units that enable myriad innovations, including artificial intelligence (AI) — is set to release its first-quarter earnings report on May 22. While the company utterly dominates the AI ecosystem, concerns exist that Wall Street may have become jaded with the performance. Therefore, NVDA stock does not present an easy-to-decipher framework.
On paper, the tech giant could be set for another cakewalk as few analysts dare to offer a contrarian view. For its fiscal first quarter, the Street is looking for average earnings per share of $5.55. The most optimistic view calls for EPS of $6.12, while the low side is looking at $5.32. In the year-ago quarter, Nvidia posted earnings of 98 cents per share.
On the revenue front, analysts anticipate a consensus target of $24.49 billion. The high-side target rises to $26.87 billion, while the least-optimistic view calls for $23.66 billion. One year ago, Nvidia generated sales of $6.52 billion.
As Business Insider pointed out, what is working in favor of NVDA stock is that it’s essentially receiving residual benefits without the underlying company even disclosing its results. Key concepts like AI infrastructure or generative AI have consistently made the rounds in the financial disclosures of tech peers Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Amazon (NASDAQ:AMZN) and Meta Platforms (NASDAQ:META).
NVDA Stock Risks Becoming a Victim of its Own Success
As circumstances stand, NVDA stock is perhaps in the most enviable position. With so many top-tier enterprises focused on AI, their eyes will invariably turn to the hardware that makes it all possible. Yes, competing enterprises exist, most notably Advanced Micro Devices (NASDAQ:AMD). However, Nvidia’s H100 GPU chip represents the clear winner.
Costing upward of $40,000, the H100 commands center stage in the tech arena. Arguably, the biggest endorsement of the processor came from Tesla (NASDAQ:TSLA) CEO Elon Musk. During the electric vehicle (EV) manufacturer’s earnings call, Musk stated that Tesla will more than double its H100 orders by the end of the year.
In other words, other companies are fueling the hype train over NVDA stock. Still, Nvidia likely has to deliver to keep the train moving in the right direction.
It’s here that circumstances get a little shaky for Nvidia ahead of its Q1 disclosure. Glaringly, Super Micro Computer (NASDAQ:SMCI) — one of the biggest producers of high-performance servers — disclosed its fiscal Q3 earnings report late last month. Despite “forecasts for revenue and profits that far exceeded the average of analyst estimates” per Bloomberg, SMCI stock dropped 14% post earnings.
Other tech enterprises — including NVDA stock — are down noticeably from their peak share price levels of this year. So, merely a good earnings beat may not be enough.
Why It Matters
Overwhelmingly, analysts support NVDA stock, rating it a consensus strong buy. Among 41 experts, 39 rate shares a buy, with only two labeling it a hold. However, the average price target of $1,005.59 only represents a modest 9% lift. And while few in number, contrarian voices have materialized, warning about NVDA’s extreme valuation.
On the date of publication, Josh Enomoto did not have (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.
