Many eyes will be locked firmly on the Nvidia Corp (NASDAQ: NVDA) share price tomorrow morning. The artificial intelligence (AI) market darling is poised to present its results for the second quarter of FY24 after US markets close tonight.
Nvidia's quarterly report is arguably one of the most highly anticipated this reporting season, and is it any wonder? Shares in the high-end computer chip company soared 24% in the day following its first quarter result in May amid a shockingly impressive outlook due to AI-driven demand.
Since then, Nvidia shares have strengthened a further 20%, now at US$456.68 a piece.
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Is the AI frenzy still alive and well?
It goes without saying AI has been the buzzword of 2023. However, it's been much more than just hot air for Nvidia. A broad swathe of businesses and organisations have been reportedly hounding Nvidia for its AI-optimised chips in a rush to build out their futuristic capabilities.
Earlier this month, it was reported that Chinese internet giants were buying up Nvidia chips. In a bid to keep pace with the industry, the likes of TikTok-owner ByteDance, Alibaba, and Tencent purchased graphics processing units (GPUs) totalling around US$5 billion worth.
Furthermore, it is believed that Saudi Arabia and the United Arab Emirates are accumulating thousands of AI-enabling Nvidia chips. Rumours are that the two countries want their own computational power and large language model (LLM), not rely on what is available in the United States and China.
Investors will be hoping this vast demand equates to a solid second quarter. To meet expectations, Nvidia must post revenue of US$11.04 billion and adjusted earnings per share (EPS) of US$2.07 — representing respective increases of 65% and 306%.
More importantly, the market will want to see robust forward guidance again to cement AI chip demand as a continuing trend, not simply a one-time sugar hit or fad.
Buying Nvidia shares before results
If you were considering buying Nvidia shares before the release of its second-quarter results, you wouldn't be alone.
The last couple of weeks have seen analysts revise their price targets higher in the lead-up to tomorrow. For example, HSBC Securities ratcheted its target up to US$780 from US$600 with a buy rating. Likewise, KeyBanc Capital Markets increased its expected price to US$620 from US$550.
These price targets suggest potentially another 20% to 71% upside in Nvidia shares.
Moreover, overnight trading data from Cboe Global Markets show traders buying call options that would be in the money if the Nvidia share price jumped above US$500 or higher following its results.
Check in with us tomorrow morning for our coverage of Nvidia's second-quarter results.
