Nvidia earnings preview: Will NVDA stock weather uncertain AI demand?

Nvidia has been a standout performer during the artificial intelligence (AI) boom, with its market capitalization soaring nearly ninefold since the end of 2022.

However, this impressive journey has been marked by volatility.

After briefly becoming the world’s most valuable public company in June, Nvidia’s stock price took a sharp downturn, losing almost 30% of its value, or about $800 billion, over seven weeks.

The chipmaker has since rebounded, with its stock now trading within 6% of its all-time high.

As Nvidia prepares to report its quarterly results, investors are keenly focused on any signs of cooling AI demand or reduced spending by major cloud customers.

Nvidia's data center business powers growth

Nvidia’s revenue has more than tripled in the last three quarters, driven largely by its data center division, which supplies the graphics processing units (GPUs) crucial for AI workloads.

Analysts are forecasting another strong quarter, with an expected 112% increase in revenue to $28.7 billion.

However, the company faces tougher year-over-year comparisons in the coming quarters, with growth projected to slow over the next six quarters.

For the upcoming October quarter, Nvidia is expected to report a 75% growth, reaching $31.7 billion.

Any deviation from these expectations could significantly impact investor sentiment.

Google and Meta's investments boost Nvidia

Nvidia’s stock gained nearly 10% in August, bolstered by continued investments from top customers like Google and Meta in data centers and Nvidia-based infrastructure.

While this optimism has driven recent gains, there are concerns about the sustainability of such spending.

The company’s performance in the October quarter will be a key indicator of ongoing demand for AI infrastructure.

A strong outlook could signal continued robust demand, while a disappointing forecast might suggest that the surge in infrastructure spending is tapering off.

Adding to the uncertainty is the timeline for Nvidia’s next-generation AI chips, known as Blackwell.

Recent reports indicate that production issues could delay large-scale shipments until the first quarter of 2025, later than initially expected.

Although Nvidia maintains that production is on track for the latter half of the year, any delays could raise questions about the company’s ability to maintain its technological edge over competitors like Advanced Micro Devices (AMD) and Google.

Nvidia’s long-term ROI

Despite expanding profit margins, Nvidia faces scrutiny over the long-term return on investment for its clients, who purchase high-cost devices in bulk.

During the last earnings call, CFO Colette Kress noted that cloud providers—who account for more than 40% of Nvidia’s revenue—could generate $5 in revenue for every $1 spent on Nvidia chips over four years.

Investors will be looking for additional metrics this quarter to reinforce their confidence.

While its stock has recovered from a recent dip, driven by sustained demand for AI infrastructure, uncertainties around future growth rates, product timelines, and customer spending persist.

Investors will closely monitor Nvidia’s forecast and management commentary to determine whether the company’s growth trajectory is sustainable or if the recent rally is at risk of losing momentum.