Nvidia to Release Report on AI to Assess the Market

• Nvidia is preparing to release a report that will assess the AI market.
• Analysts predict a 53% increase in the company's revenue.
• The rise in Nvidia's shares is attributed to trading restrictions in China.

SAN FRANCISCO — Nvidia is preparing to release its quarterly report, which may provide a clearer picture of whether the stock market is in a state of a sustained boom or if it is experiencing a technological growth that continues to accelerate.

Financial results, which will be released in the middle of the week, have become a key barometer in the artificial intelligence sector over the last two years, as Nvidia produces most of the chips that power this technology in large data centers. Last month, Nvidia became the first public company to surpass a market value of $4 trillion, and its shares rose by another 13%, adding an additional $500 billion for shareholders.

This summer, the rise in shares reflects Nvidia's impressive ascent since the beginning of 2023, when the company's market value was close to $400 billion, following the release of ChatGPT by OpenAI in late 2022, which triggered the biggest technological boom since the launch of the iPhone in 2007.

Although the tech sector has become the biggest beneficiary of the AI boom, this has also positively reflected on the entire stock market. The S&P 500 index rose by 68% since the end of 2022, with investor optimism driving bullish interest in AI.

However, despite the overall positivity, there have been hints that a small AI bubble may present itself reminiscent of the late 1990s bubble that led to a severe market crash in 2000, which subsequently dragged the U.S. economy into a recession.

Investors were startled by an MIT report that stated 95% of advancements in AI programs, as well as comments from OpenAI’s CEO Sam Altman about the potential presence of a bubble in the artificial intelligence market.

By certain metrics, shares of tech companies engaged in AI appear overvalued. For example, Nvidia trades at approximately 40 times its expected earnings, which is twice as high as what is traditionally considered a reasonable metric. The market value of Microsoft, another AI leader, hovers below $4 trillion, while rival companies like Amazon, Meta Platforms, and Alphabet range from $1.9 to $2.5 trillion.

Nvidia anticipates another quarter of strong growth for the period from April to June. Analysts predict that the company will earn $1.01 per share, which is 49% higher than last year, with revenues expected to rise by 53% to approximately $46 billion.

This increase reflects a financial boom in the AI market, as large companies are spending significant sums on creating and expanding data centers, necessary for supporting the technology. Microsoft, Amazon, Alphabet, and Meta have invested more than $325 billion in AI this year. Given its dominant position in the AI chip market, Nvidia stands to benefit from this intense demand.

However, Nvidia's growth rates have begun to normalize. If analysts’ projections hold true, Nvidia’s revenue growth in the last quarter will be significantly lower than the 122% increase recorded in the same period last year.

In addition, Nvidia reported a loss due to trade tensions between President Donald Trump and China. Following the ban on the sale of AI chips in China, the company estimated that it lost approximately $8 billion in sales. Trump announced restrictions with Nvidia at the beginning of this month, with sales falling by 15% from the company’s sales in this region, which became the topic of discussion among the general director Jensen Huang with analysts during the conference call with investors.

Tags: Economy/Technology/AI