Nvidia is set to announce its Q1 FY’25 results, with expectations of another strong quarter driven by the increasing demand for generative AI in various industries. The company is projected to report revenue of $24.6 billion, with earnings per share of $5.58, both slightly ahead of consensus estimates. Nvidia’s data center business, led by the Hopper GPU computing platform and InfiniBand networking solutions, is expected to be the primary driver of earnings, with significant growth in computing-related revenue and networking revenue due to investments in AI. The company’s accelerated computing chips are currently ahead of rivals in terms of performance, and its ecosystem of AI tools continues to drive incremental sales.
Net income for Nvidia has been on the rise, reaching $12.29 billion in Q4, up from $1.41 billion in the year-ago quarter. Favorable component costs and better scale are expected to contribute to a strong performance in Q1, with adjusted gross margins of around 77%. The company’s product mix and higher software-related sales are also anticipated to be beneficial. Nvidia’s stock has seen significant gains, rising 610% since early 2021, outperforming the S&P 500, despite periods of volatility. The Trefis High Quality Portfolio, a collection of 30 stocks, has consistently outperformed the S&P 500, highlighting the potential benefits of diversification.
Despite its strong performance, there are potential risks for Nvidia in the future. The company’s current market price of $925 per share reflects a high valuation, trading at about 35x consensus 2025 earnings and 29x 2026 earnings. The surge in GPU demand driven by AI training may ease, affecting future growth. Competition from players like AMD and big tech companies developing their own AI chips could also pose a risk. Nvidia’s valuation might be pricing in its dominance in the AI chip market, which may not be guaranteed. Trefis values NVDA stock at $731 per share, suggesting a price estimate below the current market price.
Investors are advised to consider the potential risks and uncertainties in Nvidia’s future performance, despite its strong track record. The company’s continued growth in the AI sector and data center business will be key factors to watch in the upcoming earnings report. With the volatile market conditions and heightened competition in the tech sector, it is crucial for investors to conduct thorough research and analysis before making investment decisions. Trefis offers detailed insights into Nvidia’s valuation and performance trends, providing valuable information for investors looking to navigate the complex landscape of the technology industry.
