TLDR:
- Nvidia set to report Q3 earnings on November 20, with analysts expecting 84.4% EPS growth
- Stock currently trades at forward P/E of 52.3x, above sector median of 25.3x
- SoftBank announced plans to build Japan’s largest AI supercomputer using Nvidia’s Blackwell chips
- Citi analyst expects slight revenue miss in October and January quarters due to supply constraints
- Despite potential short-term supply issues, Citi raised price target to $170 from $150
Nvidia (NVDA) is preparing to release its third-quarter fiscal 2025 earnings on November 20, 2024, with Wall Street closely monitoring how supply chain constraints might affect the AI chip leader’s growth trajectory. Analysts expect earnings per share of $0.74 and revenue of $32.95 billion.
The semiconductor giant has maintained a strong track record of exceeding expectations, beating earnings estimates in the last seven consecutive quarters. This performance has been largely driven by unprecedented demand for AI chips, particularly in the data center market.
Recent developments highlight Nvidia’s continued market dominance, with SoftBank announcing plans to construct Japan’s most powerful AI supercomputer using Nvidia’s Blackwell chips. The partnership marks a strategic expansion in the Asian market, though specific chip quantities remain undisclosed.
However, supply constraints could present near-term challenges. Citi analyst Atif Malik predicts Nvidia might slightly miss market expectations for both the October and January quarters. Despite these concerns, Malik raised his price target to $170 from $150, maintaining a Buy rating.
The company’s valuation metrics reflect its premium market position. Nvidia currently trades at a forward P/E ratio of 52.3x, compared to the sector median of 25.3x. The price-to-earnings-to-growth (PEG) ratio stands at 1.47, below the sector median of 1.98.
Looking at analyst sentiment, 31 analysts have raised their EPS estimates in the past 90 days, while only 6 have lowered them. This positive revision trend suggests continued confidence in Nvidia’s growth prospects despite supply challenges.
The anticipated rollout of Blackwell GPU servers represents a key growth driver. Industry reports indicate that AI server cabinets featuring these GPUs could command prices between $2 million and $3 million. Morgan Stanley projects potential Q4 2024 Blackwell sales reaching $10 billion.
Nvidia’s ecosystem strength continues to differentiate it from competitors. The company’s integrated approach, combining hardware, software, and developer tools, has created substantial barriers to entry for potential rivals.
Recent collaborations underscore this advantage. CEO Jensen Huang highlighted xAI’s rapid deployment of a supercomputer cluster using 100,000 H200 Blackwell GPUs in just 19 days, demonstrating both strong demand and efficient implementation capabilities.
Supply chain dynamics remain a key focus for investors. While demand continues to outstrip supply, production constraints could impact near-term revenue targets. However, Citi’s analysis suggests these issues may ease by the April quarter, potentially leading to improved performance.
The stock’s recent performance reflects market sensitivity to these factors. Shares declined 1.4% to $146.27 in recent trading, following a 2.1% gain the previous day.
Broader analyst consensus remains firmly positive. On TipRanks, Nvidia holds a Strong Buy rating based on 39 Buy ratings and three Hold ratings, with zero Sell recommendations. The average price target stands at $157.82.
The SoftBank partnership announcement carries particular weight in the Asian market. The Japanese tech conglomerate plans to create an AI marketplace supporting both AI training and edge AI inference, positioning itself as “the AI grid for Japan.”
This development gains additional context given SoftBank’s recent acquisition of British AI chip company Graphcore and its majority ownership of chip-design firm Arm Holdings.
Looking ahead to the earnings report, investors will focus on supply chain updates and guidance for upcoming quarters. While near-term supply constraints may impact results, the company’s long-term growth drivers remain intact.
The combination of strong AI demand, Blackwell GPU rollout, and strategic partnerships continues to support Nvidia’s market position, despite potential short-term supply challenges.
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