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Tech darling Nvidia’s earnings a litmus test for AI-driven market frenzy

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In the realm of technology and finance, all eyes are currently fixed on Nvidia’s earnings reports scheduled for release on Wednesday, February 21st.

This is anticipated to serve as a crucial litmus test for both the company’s performance and the broader artificial intelligence (AI) market trend that has been driving recent gains in U.S. stocks. 

Goldman equity analysts noted in a recent publication that Nvidia’s quarterly results this coming Wednesday “will be closely watched as a barometer of AI momentum.” 

Analysts project that Nvidia will announce earnings per share of $4.56 and a substantial increase in quarterly revenue to $20.378 billion, compared to $6.05 billion in the previous year.  

Analysts are optimistic about Nvidia’s performance, expecting earnings of $5 per share for the fiscal first quarter, reflecting a remarkable 359% increase, with sales reaching $22.12 billion, marking a 208% rise.  

Looking ahead, analysts anticipate a 3.9% year-over-year earnings growth for the first quarter of 2024 and a 9.0% growth for the second quarter of the same year. Overall, for the entire calendar year of 2024, analysts predict a 10.9% year-over-year earnings growth, as per data from Factset. 

Investors are particularly interested in Nvidia’s guidance, seeking clues about the longevity of the current surge in spending on data centre-based AI. Cloud service providers have been actively acquiring Nvidia’s graphics processing units (GPUs) to power various AI applications. 

Nvidia’s stock has experienced a meteoric rise, increasing by nearly 50% this year alone on the back of the AI euphoria. In 2023, Nvidia’s shares soared by an impressive 240%, cementing its reputation as a leader in the AI industry. 

“We continue to see a very strong near term picture and think that various second derivative anxieties are missing the bigger picture; we raise (price target) yet again. Longer term, cloud commentary is encouraging, but we do continue to budget for a plateau in 2025,” noted Joseph Moore, Equity Analyst at Morgan Stanley.  

Morgan Stanley increased Nvidia’s price target from $603 to $750 on February 7th. 

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