NVDA Stock: 3 Key Things to Watch When Nvidia Reports Earnings

  • Nvidia (NVDA) is getting ready to report quarterly earnings tomorrow.
  • The chipmaker has failed to regain its early 2022 momentum.
  • But experts remain bullish as the company prepares to turn a corner.
NVDA stock - NVDA Stock: 3 Key Things to Watch When Nvidia Reports Earnings

Source: Shutterstock

Many prominent tech stocks will report earnings this week. This list includes Zoom (NASDAQ:ZM) and Snowflake (NYSE:SNOW) but many eyes are already on Nvidia (NASDAQ:NVDA), which reports on Aug. 24. The Silicon-valley semiconductor designer provided a shot to fame amid the metaverse boom of 2021-early 2022. But as broad market forces intersected with supply chain constraints, NVDA stock embarked on a downward trajectory and it hasn’t stopped. While shares are up more than 5% for the month, they are still down more than 26% for the past six. The combination of bearish sentiment toward tech stocks combined with macroeconomic headwinds has made for a difficult industry landscape. Early in the month, in a preliminary release, the company announced weaker-than-expected revenue for the quarter.

Following that news, Nvidia already has a dark shadow over it as it prepares to report earnings. But many experts still remain bullish on NVDA stock, predicting a turnaround in the months ahead. That makes this an opportune time to load up on shares.
25 analysts on TipRanks rate NVDA as a “strong buy” and none have issued “sell” ratings. These Wall Street experts aren’t the only ones. InvestorPlace contributor David Moadel has issued a $300 price target for NVDA stock, citing low expectations as an excellent reason to buy now. “Among graphics card and microprocessor makers, Nvidia is one of the most respected companies,” he notes. “Therefore, many traders will watch closely as it releases its quarterly earnings and forward guidance.”

What exactly should investors be looking for from the Nvidia earnings report? Let’s take a closer look.

NVDA Stock: What to Watch For

1. Broader Earnings and Market Outlook

It’s true that Nvidia’s preliminary financial results forecasted a disappointing outlook. But in the upcoming earnings call, the company will provide more context on its revenue and sales results from the second quarter of 2022. According to a statement released by the company, “second quarter revenue is expected to be approximately $6.70 billion, down 19% sequentially and up 3% from the prior year, primarily reflecting weaker than forecasted Gaming revenue.” This may be reflective of overall weakness in the gaming sector. Gaming giants have had a difficult quarter. Activision Blizzard (NASDAQ:ATVI) is still fighting an uphill battle and Take-Two Interactive (NASDAQ:TTWO) has lost more than 20% of its value over the past six months.

In Nov. 2021, The Verge predicted that video game makers would be “feeling the sting” of the chip shortage well into 2022. Eight months later, that forecast has proven correct. If Nvidia’s earnings give investors reason to hope that chipmakers can finally achieve a positive turnaround, though, it will likely be a positive growth catalyst for gaming stocks as well. Most companies producing anything in the electronics space depend on chips. If the shortage were to subside, it would be a major boon to the entire tech sector. “The data might actually have broader implications beyond the company itself,” Moadel reports. “Nvidia’s results can help tech market investors know whether chipmakers have finally turned a corner.”

2. CHIPS Act Pressure

Nvidia’s leaders are also likely to address something else on the call that has concerned some investors; the effects of the CHIPS Act. Late in July 2022, the U.S. Senate passed a $280 billion bill designed to provide subsidies for U.S. chipmakers. While this initially sent NVDA stock up, some experts quickly cast a critical eye. While the bill’s purpose is to boost U.S. chip production, its subsidies only extend to companies that build their own chips. Intel (NASDAQ:INTC) makes its own semiconductors but Nvidia outsources production to a company in Taiwan. This led to speculation that Nvidia’s competitors might receive an edge from the bill’s passing. However, others argued that the momentum generated by the bill would push all chip stocks up.

InvestorPlace‘s Louis Navellier doesn’t think the bill will harm NVDA stock. “Although the CHIPS Act gives an edge to Intel in production, it does little to give Intel a leg up in chip design and innovation,” he notes. “That continues to be one of Nvidia’s key areas of strength. That’s why it continues to dominate the discrete GPU market, with 78% market share.”

NVDA stock has had a turbulent month and it can be tempting to attribute that to the CHIPS Act. While it has been falling recently, that is more likely due to the low revenue forecast. Many investors have been curious to hear from the company’s leaders about Nvidia’s future following the CHIPS Act and see if they share Navellier’s bullish sentiment.

3. Potential for a New Chip Boom

Another expert who saw a bright future for Nvidia is Zeno Mercer of the market research firm and advisory ROBO Global. The researcher spoke to InvestorPlace about the possibility of a new boom for chipmakers. “We’re going to see a gigantic medium-to-longer-term wave from the next generation of consumer hardware and software, like wearables and AR/VR, which require high-end chips, enterprise, and Cloud,” Mercer predicted, citing NVDA stock as a likely winner. “We’re looking at an incredible demand increase still.”

Mercer’s point is a valuable one, as it highlights Nvidia’s potential in the fast-growing metaverse/virtual reality space. As InvestorPlace contributor Faizan Farooque says of Nvidia:

The company’s GPU market share is considerably higher than competitor Advanced Micro Devices (NASDAQ:), . Nvidia’s GPUs serve multiple segments, including gaming and professional visualization. In recent years, Nvidia has also become a leading player in artificial intelligence and autonomous vehicles.

As Mercer noted, AR/VR, enterprise and cloud technology are among the “leading growth levers” that the government wants to help companies address with the passing of the CHIPS Act. Nvidia is well-positioned to continue supplying a growing demand for high-growth areas of the tech sector. A new chip boom is certainly likely and Nvidia’s leaders should speak to that on the upcoming earnings call. If they also think it is approaching, it could push NVDA stock up.

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.

Article printed from InvestorPlace Media, https://investorplace.com/2022/08/nvda-stock-3-key-things-to-watch-when-nvidia-reports-earnings/.

©2022 InvestorPlace Media, LLC