TLDR:
- Nvidia set to report Q4 earnings with expected EPS of $0.84 and revenue of $38.2 billion, showing 63% and 73% year-over-year growth respectively
- Company faces potential challenges from tariffs on Taiwan-made chips and possible new export restrictions to China
- China represents Nvidia’s third-largest market at $5.4 billion in Q3, behind US ($14.8B) and Singapore ($7.6B)
- DeepSeek’s AI model development initially caused market concern but CEO Jensen Huang argues it actually incentivizes purchase of higher-end chips
- Stock is flat year-to-date while seeing 223% gains over past year, with analysts still recommending holding despite future uncertainties
Nvidia is preparing to release its fourth-quarter earnings report this Wednesday after market close, with Wall Street projecting continued strong growth despite mounting challenges in the AI chip market.
The chip manufacturer is expected to report earnings per share of $0.84 and revenue of $38.2 billion for the quarter, according to Bloomberg consensus estimates. These figures represent increases of 63% and 73% respectively compared to the same period last year.
The company’s data center segment remains the primary revenue driver, with analysts forecasting $34 billion in revenue from this division alone. Gaming is expected to contribute $3 billion, with the remainder coming from professional visualization, automotive, and OEM segments.
While these growth rates would be exceptional for most companies, they mark a slowdown from Nvidia’s previous quarter, which saw EPS growth of 486% and revenue growth of 265% year-over-year.
The US continues to be Nvidia’s largest market, generating $14.8 billion in sales during Q3. Singapore follows with $7.6 billion, while China ranks third at $5.4 billion. This geographic distribution has become increasingly important as new challenges emerge.
Recent developments have created headwinds for the company. President Trump has proposed new tariffs on chips imported from Taiwan, where Nvidia’s manufacturing partner TSMC produces many of its processors. Additional export restrictions to China are also under consideration, potentially affecting the company’s revenue from that region.
Competition from major tech companies has emerged as another concern. Amazon, Google, Microsoft, and Meta are developing their own AI chips, potentially reducing their reliance on Nvidia’s products. These cloud service providers currently account for 50% of Nvidia’s data center revenue.
Custom Chip Threat Overrated
However, Morgan Stanley Research analyst Joseph Moore suggests the threat from custom chips may be overstated. Moore notes that while many companies have attempted to create Nvidia alternatives, most ultimately return to Nvidia’s products due to their mature ecosystem.
January saw market turbulence when Chinese AI company DeepSeek announced it had developed powerful AI models using lower-end Nvidia chips. This news temporarily erased $600 billion from Nvidia’s market value. However, CEO Jensen Huang countered that DeepSeek’s achievement actually encourages companies to invest in more powerful processors for better results.
The stock market has shown mixed reactions to these developments. Nvidia shares remain flat year-to-date, while other tech giants have seen declines. Google parent Alphabet is down 5%, Amazon has dropped 1%, Microsoft has fallen 3%, and Apple has decreased 4%. Meta stands as an exception with a 14% gain.
Looking at longer-term performance, investors who purchased Nvidia stock in late 2023 have seen gains of 223%, despite recent market volatility.
Wall Street currently anticipates Nvidia’s data center business will generate $34 billion in the fourth quarter, while gaming revenue is expected to reach $3 billion.
The company’s stock closed at $134.40 on February 21, down 4.08%, but showed signs of recovery in pre-market trading, rising 1.29% to $136.16.
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