Tech giant Nvidia is about to report in the US and here’s what could happen

Investors are bracing for fireworks when tech giant and industry-leading maker of AI computer chips Nvidia reports its third-quarter earnings soon after the US close on Wednesday.

Nvidia founder, president and chief executive Jensen Huang. Picture: Getty Images

As the world’s biggest company, Nvidia has the ability to move the global stock market more than any other.

The tech giant and industry leader in AI computer chips reports its third-quarter earnings after the US close of trade on Wednesday. As usual investors are bracing for fireworks.

With a $US3.61 trillion ($5.52 trillion) market capitalisation, Nvidia is the biggest company in the world – $160bn bigger than Apple and almost twice the value of Australia’s sharemarket.

Nvidia shares have trebled in price this year, hitting a record high of $US149.77 after Donald Trump won the US election last week with a pro-America agenda that may help US companies. But can it live up to the hype?

Options market pricing implies the Nvidia stock price is likely to rise or fall about 8 per cent on the day of its report. That implies a $440bn change in its market capitalisation.

For context, that would be the biggest change in value of any stock in history, dwarfing the value of CBA which, as Australia’s largest company, has a market capitalisation of about $261bn.

That would be nothing unusual for Nvidia but potentially consequential for the global risk appetite.

After its second quarter report on August 28th, Nvidia fell 6.4 per cent on the day and 18 per cent over six days. The S&P 500 bucked that sell-off for two days but lost 3.3 per cent over the six days.

Nvidia’s earnings actually beat expectations for the second quarter – just not by as much as usual.

However, the share price was back up hitting record highs within six weeks.

As of Wednesday, Nvidia was trading about 43 per cent above its post-results low.

On Monday, Nvidia shares fell as The Information reported that the chip giant has asked its suppliers to change the design of the server racks for its new Blackwell graphics processing unit due to an overheating problem. But on Tuesday, Nvidia rose 4.9 per cent, which was its biggest rise in over two months.

The consensus estimate for third-quarter revenue is $US33.25bn, according to Bloomberg. Data centre revenue is expected to be $US29.14bn. Adjusted earnings per share for the quarter is expected to have surged to US0.74c versus US27c in the previous corresponding period.

However, a large US broker has forecast revenue of $US38bn and EPS of US79c.

Nvidia’s more important fourth-quarter revenue forecast is expected to be $US37.1bn.

It will need to handily beat expectations for both. The question is, by how much?

“Whether these buying flows and increasingly bullish pre-positioning sufficiently raise the risk of disappointment is now a clear consideration, with expectations from the buy side firms – hedge funds – for fourth-quarter sales guidance now above $US40b, higher than where the sell-side – investment banks – which sees revenue guidance at $37-$38bn,” Pepperstone head of research Chris Weston said.

“Either way, options traders price high volatility for the day of earnings, but remain positive on the near-term upside, with heavy call buying in $US150 strikes and upwards for the 22 November expiry.”

At least there’s no doubt that the demand for AI chips is there. Cloud computing sales across the hyperscalers showed strong momentum; Azure, Oracle Cloud and Google Cloud revenue growth is increasing and capacity constraints limiting the ability to meet demand were a notable topic in earnings calls in the September quarter, according to RBC Capital Markets.

The capital expenditure outlook is “robust”, with all hyperscalers expecting strong increases in 2025 on greater cloud/AI spend and alleviation of capacity constraints capex growth expected for 2025.

But Bloomberg noted that Wall Street analysts’ estimates for fourth-quarter revenue cover a wide range of almost $US8bn, reflecting uncertainty over whether Nvidia can ramp up supplies of its new Blackwell chips amid manufacturing issues that have slowed their release.

“Expectations are high, and the market will go into Nvidia’s earnings announcement positioned long, looking for a fifth-consecutive quarterly earnings beat,” IG market analyst Tony Sycamore said.

“CEO Jensen Huang’s commentary on the call will be particularly important regarding expectations around the Blackwell launch, supply, and Hopper shipments.”

Capital.com senior financial market analyst Kyle Rodda said that with Nvidia’s share price “richly valued” a declining rate of earnings growth raised the risk that guidance would disappoint.

“The critical detail is demand for chips for the next quarter, especially as the company looks to ramp up its higher-power Blackwell product amid ongoing signs of a peak AI investment from so-called hyperscalers,” he said.

Based on the share price reaction to Nvidia’s second-quarter results, numbers that don’t shoot the lights out by as much as normal could easily spark a sell-off. But if there’s anything like the 20 per cent fall that occurred at that time, Nvidia shares will soon be snapped up by bargain hunters.

As markets wait to see the shape, timing and sequence of Donald Trump’s policies after his inauguration on January 20th, Nvidia and the so-called “Magnificent Seven” stocks are likely to keep driving markets.

“Nvidia isn’t just a stock; it’s a bellwether for the AI revolution,” SPI Asset Management managing partner Stephen Innes said.

“Its influence extends beyond Silicon Valley, reshaping expectations and rewriting records across the global markets.

“Nvidia’s performance will set the tone for tech’s trajectory and market sentiment heading into 2025. Whatever happens, one thing is clear: the stakes couldn’t be higher.”

Originally published as Tech giant Nvidia is about to report in the US and here’s what could happen