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Nvidia eyes strong first quarter results as analysts remain bullish

This AI hype has enabled Nvidia to annihilate consensus sales and profit forecasts in all four quarters of the financial year 2024.
This AI hype has enabled Nvidia to annihilate consensus sales and profit forecasts in all four quarters of the financial year 2024.

Chip designer Nvidia is expected to give the market another knockout trading update on Wednesday, following a run of stellar earnings reports that have helped the stock soar by nearly 200 per cent over the past year to a market cap of $2.27 trillion.

A consensus of analysts has forecast that sales will leap to $24.7bn, according to Visible Alpha, more than tripling from the $7.19bn reported in the same period last year.

The company is also expected to report net income of $16.5bn, soaring up from the $2.04bn profit recorded a year ago. Diluted earnings per share (EPS) are similarly projected to skyrocket to $5.6, up from just 82 cents in the first quarter of 2024.

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Given its recent exponential growth driven by artificial intelligence demand, Nvidia’s data centre business remains the key attraction for many investors. The segment’s revenue rose over 400 per cent to a record of $18.4bn in 2024.

The ongoing AI boom is fuelling data centre capital expenditure, which is likely to funnel a large amount of cash into Nvidia’s coffers. Investment research firm Morningstar has forecast a 113 per cent rise in data centre revenue to $101bn for the financial year 2025.

This AI hype has enabled Nvidia to annihilate consensus sales and profit forecasts in all four quarters of the fiscal year 2024, despite constant analyst upgrades.

According to Zack’s, there have been five upgrades to first-quarter earnings forecasts and seven for the whole of the year to January 2025 in the last 60 days, with zero downgrades.

“The market is therefore clearly geared up for another upside surprise relative to the guidance provided by chief executive Jensen Huang alongside the fourth quarter results in January,” said AJ Bell analysts.

HSBC recently reiterated a “Buy” rating on Nvidia, raising its price target to a Street-high of $1,350, suggesting a 46 per cent upside potential. The broader analyst consensus remains bullish, with 35 out of 40 analysts rating the stock a “Strong Buy”.

However, with supply constraints still posing a challenge, investors will be watching for any updates on how Nvidia’s manufacturing partners are scaling up to meet the surging demand for AI chips.

In March, the Magnificent Seven stock stirred up some excitement with the announcement of its new and more powerful Blackwell platform, which Nvidia said will be the highest-performance AI chips on the market. Investors will be closely watching for more details.

Jensen Huang, founder and chief executive of Nvidia, said: “Generative AI is the defining technology of our time. Blackwell is the engine to power this new industrial revolution. Working with the most dynamic companies in the world, we will realise the promise of AI for every industry.”