Nvidia Q2 Earnings Preview: Investors to Assess AI Investment Themes and China Chip Sales
Nvidia Q2 Earnings Preview: Investors to Assess AI Investment Themes and China Chip Sales
- Nvidia Q2 earnings are set to test market sentiment after Nasdaq closes in the red to start the week.
- Nvidia’s performance and outlook are in focus amid concerns about investment in the artificial intelligence space.
- Options market expects an implied move of +/- 10.99 points post-earnings, or 6% of Monday’s closing price.
Nvidia to report second-quarter earnings on Thursday, August 27
Nvidia (NVDA) is set to report earnings on Wednesday, August 27, after the market close. The chip maker rose on Monday, closing about 1% higher but it wasn’t enough to help the broader market, with the Nasdaq moving slightly lower at the closing bell after starting the day in the red.
The second quarter fiscal results are perhaps the most closely watched earnings for traders thanks to Nvidia’s giant market capitalization and its reflection of how demand is holding up for artificial intelligence, one of the main drivers of this bull market.
Earlier this month, Reuters reported that Nvidia is developing a chip for the China market to replace its H20. Nvidia was restricted from selling the chip in China temporarily earlier this year. Nvidia got an export license for the chips on the condition that it gives 15% of its sales from China to the United States.
Now, China is growing skeptical of Nvidia’s chips, believing that the U.S. government may have persuaded Nvidia to add the ability to compromise them. According to the Reuters report, Nvidia is making a new chip for China that is supposed to be more advanced than the H20. China has requested technical documents on Nvidia’s chips to absolve their concerns, but Nvidia’s response hasn’t been shared yet. Chief Executive Officer (CEO) Jensen Huang’s comments on the earnings call will be closely analyzed by traders.
Meanwhile, concerns are brewing about the pace that companies are investing in AI and if it’s sustainable. Meta Platforms (META) announced last week that it would freeze hiring for positions in its artificial intelligence division. Meta claimed that it was due to restructuring, although markets viewed it as a potential warning sign that AI spending could decrease.
What do investors expect?
According to TradingView, analysts expect Nvidia’s second quarter earnings per share to come in at $1.01 on revenue of $46 billion. Last year, Nvidia reported EPS of $0.68 on $30 billion in revenue.
There is a decent chance that Nvidia beats those estimates with its track record. It’s beaten average estimates every time in its previous four quarters.
Trading Nvidia earnings
Nvidia put in a 3.25% gain after its first quarter report when it beat on earnings and revenue. It’s up 26% since that earnings report. The Nasdaq is up 9.8% over the same period. Nvidia is also on track to record a fifth monthly gain with only one trading week left in August.
The overperformance of late also means that Nvidia likely needs to live up to its high expectations. Technically, Nvidia is in a strong position recently crossing back above its 9- and 21-day exponential moving averages (EMAs) after surrendering those moving averages last Tuesday. The move also displayed some support at the 170 level, evidenced by an intraday drop below the
The implied volatility rank (IVR) for Nvidia is 19.8, showing that volatility is subdued compared to the past twelve months of trading. The options for Nvidia shows a +/- 10.99 point move for earnings, or just over 6% of Monday’s 179.84 stock price.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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