Shanghai, November 20 (Xinhua) -- After the US stock market closed on Wednesday, November 20 (Eastern Time), Nvidia is about to release its third quarter financial report, which may become another "barometer" for the subsequent trend of the US stock market.
Since the beginning of this year, the stock price of Nvidia has continued to rise. As of the close of the US stock market on November 19th, Nvidia closed up 4.89%, with a growth rate of 205% so far this year. Its market value has climbed to $3.61 trillion, making it the world's largest listed company by market value.
Analysts generally believe that the revenue of Nvidia's data center business and the supply and demand situation of Blackwell architecture chips remain the focus of market attention in this financial report. According to the option analysis company ORATS, the implied volatility of NVIDIA's options market is 8.5%, indicating that the options market is betting on a daily fluctuation of 8.5% after its performance, with a market value or volatility exceeding $300 billion.
Data center business revenue remains key
Current analysts expect Nvidia to achieve revenue of $33.28 billion in the third quarter, an increase of 84% year-on-year; Net profit reached 17.45 billion US dollars, a year-on-year increase of 88.9%; Earnings per share were $0.7, up 88.11% year-on-year.
Analysts generally believe that as Nvidia's most critical business, the data center business is expected to continue breaking its revenue record in the third quarter, with an expected revenue of $29.083 billion, a year-on-year increase of 100.38%. The share of this business in the company's revenue is expected to continue to expand from 87.5% in the previous quarter to 88.06%.
Morgan Stanley analysts stated in a recent report that they expect Nvidia's data center business to remain the main growth engine in the next five years. Currently, Blackwell's production growth is quite strong, and the market's enthusiasm for generative AI has created an environment for Nvidia's continued revenue growth.
Last week, Nvidia raised its stock target price from $150 to $160 and maintained an "increase" rating, citing strong data center growth.
It is worth noting that in the past seven quarters, benefiting from strong demand for AI chips, Nvidia's revenue and profits have exceeded market expectations. Therefore, on the eve of this financial report, several Wall Street investment banks expressed optimism about Nvidia's financial report and raised its target price.
Morgan Stanley analysts have raised Nvidia's target price from $150 to $160; Mizuho analysts have raised their target price from $140 to $165; UBS analysts have raised their target price from $150 to $185; HSBC analysts have raised their target price from $145 to $200.
Focus on Blackwell's supply situation
Just before Nvidia's financial report was released, there were reports that its new generation Blackwell chips may once again face delayed delivery issues due to serious overheating problems in high-capacity server racks.
Since its release in March and announcement of production in June, the Blackwell architecture chip was initially scheduled to be shipped in the second quarter of 2024. However, as the delivery time approached, Nvidia stated that the Blackwell chip would be delayed due to design defects. Nvidia CEO Huang Renxun stated during the subsequent Q2 earnings conference call that all design issues have been fixed and mass production is expected to be achieved in the fourth quarter.
Analysts say that for the third quarter financial report, Blackwell's shipment situation and whether it has solved the problems of architecture defects and overheating have attracted market attention.
Morgan Stanley stated in a report that the development of AI applications is still in its early stages, and the Blackwell cycle will continue to drive Nvidia's performance upward. The current supply constraints may limit Nvidia's growth space, and it is expected that Blackwell will further drive Nvidia's revenue in the first quarter of next year, with sales between $5 billion and $6 billion.
Recently, Huang Renxun revealed at an investor conference held by Morgan Stanley that Blackwell has been sold out. Morgan Stanley analyst Joe Moore stated that it is understood that the backlog of orders for Blackwell GPU products has reached 12 months, indicating strong demand for AI hardware.
How much room for further growth does NVIDIA have in the future
According to data statistics, among the 42 analysts who recently rated Nvidia, 39 gave a "buy" rating and 3 gave a "hold" rating. The average target price for the next 12 months is $165.18, which is about 12.36% higher than the current level, with the highest target price reaching $200.
But with the recent release of the third quarter 13F position reports by major investment institutions, trading actions by some large investment institutions have surfaced. Among them, Jinglin Asset cleared 12 stocks including Nvidia, Tesla, Amazon, Microsoft, etc. in the third quarter; Bridgewater and Hillhouse have also reduced some of their holdings in Nvidia.
Analysts said that in August of this year, Nvidia's board of directors approved a new $50 billion buyback plan. The current price to earnings ratio (P/E) and price to cash ratio (P/FCF) of Nvidia's stock are lower than the average level of the past two years. If Blackwell can really drive the company's stock price up, the management may start expanding the stock repurchase scale in the third quarter. The timing of a company's stock repurchase is particularly important.
If Nvidia fails to repurchase shares at a more reasonable valuation before Blackwell's stock price surges, or if Blackwell's sales guidance falls short of expectations, it may become an unfavorable signal for future trends.
Bank of America stated that Nvidia currently holds a dominant position in the US stock market, contributing approximately 20% of the S&P 500 index's returns over the past year. If Nvidia's performance disappoints, the risk of 'single stock fragility' associated with the company will increase.
Investors also seem to be prepared for a major shock in the US stock market. According to data, the implied change for Nvidia in the options market is 8.5%, indicating that the options market is betting on a daily rise or fall of 8.5% after its performance, and its market value may fluctuate by over $300 billion.