Nvidia’s answers to 3 questions will affect where the stock goes next

On November 20, 2024By Littum

Stop us if you’ve heard this before: Nvidia’s Wednesday night earnings report is a big deal on Wall Street. Results from the world’s most valuable chip maker will give investors the clearest insight into the state of the AI boom since … the last time the company reported its financial results in late August. Excitement about artificial intelligence has been a major driver of stock market gains over the past two years — ever since the launch of ChatGPT sparked an investment surge that has lifted far more than just tech companies. The circle of winners has grown to include industries such as those that manufacture electrical components and power generation equipment, and even heavy utilities that are expected to benefit from increased data center power consumption. Still, no company is more synonymous with artificial intelligence than Nvidia, which has a dominant position in the market for high-end processors that support applications like ChatGPT. Its sales, profits and market capitalization have increased as a result. It has also created a dynamic in which the company’s quarterly earnings reports are treated as make-or-break events, with seemingly limitless anticipation pushing the stock higher on release. That’s how Nvidia’s better-than-expected results and solid outlook in August can still be followed by a nearly 20% drop in just over a week. Then the buyers stepped in again, deeming the giddiness excessive, and a new rally began. It’s still going as of Tuesday. Nvidia shares are up nearly 40% since their most recent low on September 6. Along the way, Nvidia dethroned Apple as the world’s most valuable company, and it hasn’t looked back. Now it’s earnings time again. The curse of sky-high expectations threatens to strike again. “I say own it, don’t trade it,” Jim Cramer said Tuesday as he tried to look through the thicket of hype and stay focused on Nvidia’s bright multi-year outlook. He bestowed this “own it” designation on just two stocks, Nvidia and Apple. “There are two things you need to know about Nvidia,” Jim continued. “One is that they have an incredible demand, far more than they can handle… And secondly, there is no competition because there is no one near them, including (with club teams) AMD, which is a company I like, a lot.” Here’s a closer look at a few key issues surrounding Nvidia’s third-quarter 2025 financial report and subsequent conference call at 5 p.m. ET. Overheated or overdone? Investors will want to know whether the rollout of Nvidia’s next-generation AI chip platform Blackwell has hit any problems — specifically, whether a recent media report about Blackwell overheating in a particular configuration could result in a slower-than-expected rise in revenue as the company and its customers find a solution. Nvidia stock was lower Monday on the news. Few doubt CEO Jensen Huang’s description of Blackwell demand as “insane.” The uncertainty at this point is about the timing. Nvidia has said it expects to post “several billion dollars” in Blackwell sales in the current quarter, which runs from November to January. Analysts currently expect revenue of $37.04 billion in the January quarter, according to FactSet. Nvidia’s guidance is critical to shaping Wall Street’s reaction to quarterly results, and it will be no different this time around. “If there was another company sneaking up and nibbling on them, then (Blackwell pushouts) would be a problem,” Jim said. “But there isn’t, so I don’t see anything to be upset about, other than the fact that I want to be ready when they say, ‘Look, we’re not going to ramp it up in January. We’re going to ramp it up in April.’ If there are people who are unhappy with it and want to sell it, then we have to be ready.” In a note to clients on Tuesday, analysts at Truist Securities acknowledged that there could be technical and supply chain challenges facing Blackwell analysts said everything they’re hearing from Nvidia, its partners and industry contacts feels “overwhelmingly positive.” will be replaced with Hopper, which offers downside protection for revenue,” analysts wrote. Hopper is the name of Nvidia’s current-generation AI chips, the H100 and H200. Margin health? Nvidia’s triple-digit revenue growth in recent quarters is generally expected to slow due to the law As a result, gross profit is an increasingly important part of the investment story. In fact, Nvidia’s third-quarter gross margin guidance — and its implications for fourth-quarter numbers — was seen as one of the very few blemishes in the August quarter. “Keep an eye on GM (gross margin),” analysts at Bank of America told clients in a note Sunday. Analysts said Nvidia needs to report something in the 73% to 74% range to keep its earnings per share. stock for fiscal 2026 on track to reach the bull case of $5 or more. How to calculate gross margin: Start with a business’s revenue, then subtract the costs of that revenue. This figure is known as gross profit or gross income. Gross profit divided by sales multiplied by 100 establishes the gross profit percentage. In Nvidia’s most recent quarter, the gross margin was 75.7%. The rollout of Blackwell, even before talk arose of potential heat challenges, was understood to be a factor squeezing margins in the short term. “Looking ahead to FY26, we see margins falling into the low 70s as Blackwell ramps up with initially lower (production) yields,” Susquehanna analysts wrote in a Nov. 14 note. “In short, we expect another strong report, but note heightened expectations in print, with the narrative around the Blackwell ramp and GMs being important to drive the stock further up.” Superior and software strength? What do Japan, Indonesia, India and Denmark all have in common? For our purposes, at least, those are places Nvidia’s Huang has visited in recent weeks to highlight AI and discuss country-specific initiatives the company is involved in. The trips and announcements are all part of Nvidia’s broader strategy for supreme AI — a concept that refers to a country having control over its computing infrastructure and data to develop AI solutions that incorporate their own solutions. Nvidia said in August that it expected Superior AI to generate low double-digit billions in revenue this fiscal year. Any update to this projection would be welcome and help investors understand the demand from this burgeoning group of customers. US tech giants such as Microsoft, Meta Platforms and Amazon indicated in their latest earnings reports that they continue to spend billions of dollars on AI computing infrastructure – no doubt, this is good news for Nvidia. Sovereign AI represents a different kind of growth in the coming years. Similarly, software is another long-term bet that could help Nvidia offset some of the inherent cyclicality in hardware sales. In a note to clients on Monday, analysts at Evercore ISI said that in addition to overall guidance, investors are likely to be interested in Nvidia’s software growth — and specifically its offering called AI Enterprise, which provides a range of tools for businesses. In August, CFO Colette Kress said Nvidia was on track to end the year with an annual operating run of about $2 billion in software and support revenue. AI Enterprise contributed “in particular” to the software expansion, according to Kress. (Jim Cramer’s Charitable Trust is long NVDA and AMD. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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Nvidia CEO Jensen Huang delivers his keystone speech ahead of Computex 2024 in Taipei on June 2, 2024.

Sam Yeh | AFP | Getty Images

Stop us if you’ve heard this before: Nvidia’s Wednesday night’s earnings report is the big deal on Wall Street.

Results from the world’s most valuable chip maker will give investors the clearest insight into the state of the AI boom since … the last time the company reported its financial results in late August.