Today is a make-or-break day for Nvidia (NASDAQ:NVDA). The chipmaker reports fourth-quarter earnings after the market closes, and one analyst even says it has repercussions for the entire stock market. Everything could tumble if the company doesn’t nail a Goldilocks print. Market panic will ensue because NVDA stock is priced for perfection.
That opinion is not so far from the truth. Nvidia is one of the primary reasons the S&P 500 was launched into a bull market. The meteoric rise of NVDA stock last year as part of the so-called Magnificent Seven spilled over into 2024. Shares are up 40% this year and were even higher before the stock pulled back yesterday ahead of the earnings report.
For investors with a long-term mindset, caution is worthwhile but not critical. An NVDA stock analysis shows Nvidia is still a buy no matter what the earnings report holds.
Outlandish Expectations Demand Fantastical Results
Wall Street has high hopes for the chipmaker. Analysts expect revenue to more than triple from last year. They forecast Nvidia will produce $20.6 billion in sales, 240% more than the year-ago period. Profits will skyrocket even more with a sevenfold increase to $10.5 billion. The driver of this insane growth is, of course, artificial intelligence (AI). Nvidia’s data center segment that houses the AI business is expected to quadruple to $17 billion.
For any other company, such lofty targets would signal a death knell for the stock. It would be almost impossible to attain. Yet, for Nvidia, the estimates are completely within the realm of possibility.
Nvidia’s H100 Tensor Core graphic processor units (GPU) chips are the most powerful on the market. They were also designed precisely for AI applications. The chips contain 80 billion transistors that allow them to process the trillions of parameters AI requires. They are also in high demand. Microsoft (NASDAQ:MSFT) and Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google need them to build out their generative AI tools and services. Meanwhile, Tesla (NASDAQ:TSLA) wants them to train its autonomous vehicles. The Financial Times reported both Saudi Arabia and the United Arab Emirates have also purchased large quantities.
Earlier this month, Nvidia introduced the Grace Hopper 200, or GH200, which is even more powerful than the H100.
The Only Way Out Is Up for NVDA Stock
This is why the growth expectations seem fantastical. There is seemingly no upper limit to Nvidia expansion. Advanced Micro Devices (NASDAQ:AMD) and Intel (NASDAQ:INTC) are introducing their own AI chips, some that are arguably comparable in power and scale to Nvidia’s output. However, no one expects them to dent Nvidia’s growth. Hyperscalers, or supersized cloud services providers, were responsible for half of Nvidia’s data center segment growth in the third quarter. Expect them to account for much of the growth again.
That is partly why investors shouldn’t fret too much about this earnings report. Even if it doesn’t hit the whisper numbers, or the unofficial results above what Wall Street expects, the outsized demand for these AI chips will still drive Nvidia forward. Because it’s not just cloud provider data centers that need the chips. Gaming, automotive, personal computers, networks, and more need them too. The AI revolution is just starting. There is a long runway of growth still to come that will seek out Nvidia’s solutions.
Investors should hope for a “miss” today, as they will have a chance to buy NVDA stock at a relative discount. This stock has not yet finished its long journey higher.
On the date of publication, Rich Duprey did not hold (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.