Markets are awaiting Nvidia's results, with the chip company likely to outperform expectations

2023-08-23 10:20:05

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Wall Street

10 companies raised the price target per share last week

Dubai – Al Arabiya.net

Posted on: August 22, 2023: 02:05 PM GST Last updated: August 23, 2023: 02:20 PM GST

Markets are awaiting the announcement of the artificial intelligence chip company “Nvidia” for its financial results for the second quarter today, Wednesday, after the closing bell on “Wall Street”. The company is widely expected to once again beat analyst expectations.

Revenue is also expected to rise 65% from the same period last year, according to data compiled by Bloomberg.

Wall Street is anticipating that the company will announce strong future guidance when revenue grows by about 110% during the third quarter to $ 12.50 billion, according to Refinitiv data. With one exception, the company’s revenue guidance has outperformed market estimates every time in the past two years.

The company’s forward 12-month forward share price-to-earnings ratio rose dramatically to more than 80 after forecasting second-quarter revenue growth of more than 50% in May.

It now trades at nearly 40 times earnings for the next 12 months, which is much higher compared to AMD’s 29 times.

At least 10 brokerage firms raised their price targets for the stock last week, pushing the average price target to $500, which is 10% higher than current levels.

HSBC, KeyBanc Capital Markets and BMO Capital Markets are among the latest companies to boost their price target ahead of the release of second quarter results.

HSBC analyst Frank Lee this week raised his price target for the stock to $780 from $600. Lee’s forecast is for a gain of more than 80% compared to Friday’s close of $432.99. He also confirmed his previous recommendations to buy the shares of the semiconductor company.

Amidst this anticipation, the Nasdaq Composite Index managed, on Monday, to break a four-day losing streak, rising 1.6%, which is the largest daily increase since July 28, when it added gains at the time by 1.9%. One of the most prominent stocks that supported the rise of the index was the “Nvidia” stock, which rose 8% in that session.

According to a report by “US CNBC”, published on Monday, the rise in US bond yields to the highest level since November 2007 could not control the market’s excitement regarding the results of “NVIDIA” business.

As for Tuesday’s session, NVIDIA shares fell from their highest levels ever, moving in line with the market’s performance in that session.

The company’s shares fell by 2.76% during the session, after earlier hitting a record peak, surpassing the highest level since mid-July.

Increased bets that NVIDIA’s revenue will once again exceed Wall Street estimates led the stock to rise about 19% from its two-month low, which it hit last week.

Data showed, according to a Archyde.com report seen by Al Arabiya.net, that traders in the US stock options market expect a greater than usual fluctuation in the company’s shares after the quarterly results of the chip maker are issued.

According to Trade Alert data, there is a possibility that Nvidia stock will swing by approximately 11%, in either direction (up or down), by Friday.

A move of this magnitude would be greater than the chipmaker’s average post-day gains for the past eight quarters of 8.6%, but still well below the 24.4% jump after its last earnings report.

The stock rose about 11% in the past seven sessions, bringing its gains since the beginning of the year to about 210%.

Nvidia’s stock has tripled in value this year, adding more than $700 billion to the company’s market capitalization and making it the first trillion-dollar chipset company, making it the fifth-largest US company by market capitalization, after both Amazon and Apple. Microsoft, and Alphabet.

One of the main reasons for the rise in the “Nvidia” stock is its basic technology, as the “Chat GPT” platform relies on the graphics processing units (GPU) of “Nvidia”. They are widely regarded as the best chips for training generative AI models.

On Monday, the Financial Times reported, citing private sources, that Saudi Arabia and the UAE had purchased thousands of NVIDIA graphics processing units.

Saudi Arabia has bought at least 3,000 of the company’s H100 chips, and the UAE, which has also begun work on its large language model, “Falcon”, has secured thousands of the company’s chips, according to the newspaper’s report, which was seen by Al Arabiya.net.

NVIDIA’s powerful H100 chips cost about $40,000.