Tonight, the world is waiting for "NVIDIA time."

Author: Long Yue, Wall Street Insights

The much-anticipated "NVIDIA Time" is about to make a significant impact.

After the U.S. stock market closes on Wednesday, Eastern Time, the stock known as "the most important stock in the world" is set to release its Q2 earnings report for the fiscal year 2025, followed by an earnings call. NVIDIA's report not only concerns itself but also impacts the entire global technology and financial industry supply chain.

In the AI frenzy, NVIDIA, which is "far ahead of the pack," is given high hopes by the market. Market optimism suggests that NVIDIA's revenue this quarter will double year-on-year, with expectations for the company's stock price to reach new highs. Of course, there are continuous doubts such as "AI is overhyped" and "NVIDIA's valuation is too high."

Whether NVIDIA can meet the market's optimism and renew the "AI faith" is crucial. Morgan Stanley stated that if NVIDIA's revenue exceeds expectations, it could drive AI-related stocks up by 3-15%; conversely, disappointing results could lead to a collapse of AI stocks. Bank of America believes that if NVIDIA's performance disappoints, a 10% volatility could occur, amounting to about $300 billion in fluctuations.

In addition to performance, the production timeline for NVIDIA's next-generation AI chip, Blackwell, has also become a focal point.

Zerohedge reports that typically, NVIDIA's earnings data is released around 4:20 PM Eastern Time (4:20 AM Beijing Time on Thursday), followed by a conference call at 5 PM Eastern Time (5:00 AM Beijing Time on Thursday).

1. Will Revenue Double? Market Generally Optimistic

So far this year, NVIDIA has surged over 170%, maintaining a market capitalization just above $3 trillion, while the average S&P 500 component stock is only $99 billion. However, Koyfin data shows that after reaching a peak of around $135 in June, the stock seems to have stagnated.

Can the latest earnings report push NVIDIA's stock price higher again? The market generally expects NVIDIA's Q2 revenue to double year-on-year, with an anticipated growth of about 112%, reaching $28.68 billion.

Goldman Sachs supports NVIDIA and provides a revenue forecast above market expectations. The firm expects the company's Q2 revenue to reach $29.769 billion and earnings per share of $0.68, which are 4.1% and 5.9% higher than market expectations, respectively. Goldman Sachs believes the Q2 report will show continued strong demand for NVIDIA's H100 GPU, with H200 beginning to ship in volume. Goldman Sachs stated:

NVIDIA's earnings have upside potential, with an expected earnings per share (GIR) of $4.16 for fiscal year 2025; and the strong demand trend continues, with cloud service providers (CSPs) and enterprise demand remaining robust, which may support NVIDIA's performance. The earnings rhythm over the past few quarters has seen revenue exceed expectations by about $1.5 billion each quarter (with July quarter revenue expectations around $28.8 billion as a reference), and the next quarter's revenue is expected to grow by about $2 billion sequentially.

J.P. Morgan expects NVIDIA's Q2 revenue to reach $29.85 billion, also above the general market consensus ($28.6 billion), with a guidance range of $27.44~$28.56 billion:

For Q2 expectations, revenue: $29.85 billion, guidance range $27.44~$28.56 billion, market consensus value $28.6 billion; Data center revenue: $25.52 billion (previous quarter $22.6 billion); Gross margin 76.2% (guidance range 75%-76%); Earnings per share (EPS) of $0.69, with the market consensus at $0.64. For guidance, Q3 revenue is expected to be $32.95 billion, with the market consensus at $31.41 billion. Revenues for fiscal years 2025 and 2026 are expected to be $125.7 billion and $186.6 billion, respectively, with market consensus at $120.3 billion and $166.18 billion.

Image: Current market expectations for NVIDIA's performance

Morgan Stanley expressed optimism about NVIDIA's performance in a research report on August 25, stating, "We expect this to be a strong quarter, likely exceeding high expectations."

Morgan Stanley pointed out that if NVIDIA's revenue exceeds expectations, AI-related stocks could see a price increase of 3-15%. Conversely, if it falls short, the entire AI stock group could see a decline of 5-10%, and the priority for stock selection may reverse.

However, Morgan Stanley advises that even if the Q3 report is disappointing, "do not give up on AI-related stocks." They believe that although AI stock valuations have been readjusted, they are still far from bubble levels, and some price corrections during the price discovery phase are normal.

Interestingly, the cryptocurrency sector has quietly cast a vote of confidence for NVIDIA. Analysts point out that based on the recent performance of AI tokens, the crypto market seems to have given a positive nod to NVIDIA's earnings report. AI crypto tokens have surged in the past week, significantly outperforming the overall cryptocurrency market.

2. Could NVIDIA See $300 Billion Volatility? Bank of America Warns: Don't Underestimate the Risks

Bank of America analyst Gonzalo Asis warned in a recent report that the market "may have underestimated the risk of disappointing performance from NVIDIA," and the earnings report results could bring unexpected volatility to the market.

Currently, the options market has already "priced in" high volatility for NVIDIA's stock after the earnings report. The implied stock price volatility for NVIDIA options is at 10% (which translates to about $300 billion in fluctuations based on a $3 trillion market cap), and since 2018, the stock has never dropped more than 8% on earnings report day. The Bank of America report mentioned:

The implied stock price volatility for NVIDIA options is 10%, meaning the stock price could fluctuate 10% in either direction. Since 2018, the stock has never dropped more than 8% on report day. The volatility index (VIX) on August 5 was 65, highlighting a return of broader market fragility, and the S&P 500 often remains weak after such a significant shock; any unfavorable results from NVIDIA's earnings report could exacerbate market instability.

3. Concerns Over Next-Generation AI Chip Blackwell Timeline

Morgan Stanley believes that whether NVIDIA's Q3 revenue guidance meets market expectations may not significantly impact the stock. What truly affects the stock is whether the company can alleviate investor concerns over potential delays in Blackwell due to redesigns.

NVIDIA CEO Jensen Huang stated in May that the chip would ship in Q2 of this year. Earlier this month, The Information reported that the company is facing production issues, which could push significant shipments to Q1 2025. Analysts noted that design hurdles could delay shipping times.

Morgan Stanley stated that this delay cannot be ruled out, but through supply chain investigations and observing strong procurement demand and increased capital expenditures from cloud computing vendors, they concluded that the current state of the AI chip market is very good.

Some analysts suggest that NVIDIA could offset much of the impact from Blackwell delays by substituting orders with the previous generation Hopper chips. HSBC analyst Frank Lee wrote in an August report: "We expect NVIDIA to reduce its focus on Blackwell B100/B200 GPUs in the second half of the year and shift more attention to Hopper H200."

J.P. Morgan believes that NVIDIA's GB200 capacity expansion may slow in the second half of 2024 but is expected to expand significantly in 2025. Although there will be initial production challenges, it is anticipated that shipments related to Blackwell GPUs will still reach over 4.5 million units in 2025.

4. What Else is Worth Watching?

"This is currently the most important stock in the world," said EMJ Capital analyst Eric Jackson to the media, "If they fail, it will pose significant problems for the entire market. I believe their stock price will see unexpected increases."

Several analysts believe that NVIDIA's earnings report is a referendum on investments in artificial intelligence and the semiconductor industry.

They state that NVIDIA's rapid growth will inevitably slow down, and various risks from peer competition to macroeconomic factors and geopolitical issues will gradually emerge in the coming years. However, they still believe that good times can last at least temporarily.

At the same time, September is considered the seasonally weakest month for the stock market, with the S&P 500 index rising only 44% of the time during this period, with an average return of -1.20%. Bank of America noted that the return rates for September and October in presidential election years are also poor, averaging -0.46% and -0.34%, respectively.