Nvidia (NVDA) is scheduled to report results of its second fiscal quarter after the market close on Wednesday, November 16, with a conference call scheduled for 5:00 pm ET. What to watch for:

CHINA RESTRICTIONS: In a research note ahead of earnings, Bank of America analyst Vivek Arya noted that Nvidia had announced intra-quarter it could face up to $400M in restrictions related to shipments of its high-end A100/H100 AI products to China hyperscale customers. Since none of those China customers were on subsequently published U.S. Dept. of Commerce entity/unverified lists, the analyst believes Nvidia was able to partially fulfill customer demand by using lower spec Ampere products, perhaps even leveraging existing inventory. However, the disruption could still have impacted Q3 so he flags few hundred million dollars headwind to the $5.9B guided/consensus sales. Importantly, Arya expects Q3 to be the bottom of the cycle for Nvidia, with Q4 sales likely guided up quarter-over-quarter towards $6.1B. He maintained a Buy as he expects sales to re-accelerate to best-in-sector mid-teens year-over-year pace in 2024/2023 driven by new 5nm product cycles, easier year-over-year compares in gaming, and a relatively resilient U.S. cloud Capex.

SOFT SETUP: On Friday, Oppenheimer analyst Rick Schafer lowered the firm's price target on Nvidia to $225 from $250, while keeping an Outperform rating on the shares. The analyst sees a soft setup the third and fourth quarters as enterprise spending weakens, gaming inventory digests and U.S.-China restrictions weigh. He also sees gross margin tailwind over time as written-off gaming/ProVis GPUs seep into topline, views current headwinds as transitory, and sees Nvidia’s AI-led structural growth thesis intact.

WAIT-AND-SEE STANCE INTO RESULTS: Also commenting on the upcoming Nvidia’s quarterly results, Wells Fargo analyst Aaron Rakers noted that given the recent strength in the shares, he now recommends a “wait-and-see stance” into the upcoming Q3 results. He maintained his Overweight rating on the name and said he expects investors to be mostly focused on Datacenter and Gaming. Regarding Datacenter, the analyst highlighted positive recent demand data points and said he expects focus on visibility with investor sentiment focused on sustainable 20%-plus year-over-year growth. Regarding Gaming, Rakers expects Q3 results or tempered Q4 guide will provide investor confidence in a Gaming bottom if Nvidia reiterates sell-though demand remaining at $2B/quarter-plus.

BUYER INTO EARNINGS: Bullish on the name, Piper Sandler analyst Harsh Kumar told investors last week that he is a buyer of Nvidia into this week's earnings as he believes the January quarter guidance will see a resumption of growth for the data center business. In addition, the vast majority of GPU inventory excesses in the gaming business will cleared by the October quarter, with potentially some inventory left in the channel for the January quarter, Kumar added. He thinks Nvidia's growth rates will slow down given the recessionary headwinds, but still expects fiscal 2024 to grow in the 20% range. Kumar kept an Overweight rating on the shares with a $200 price target.

CAPEX GUIDE POSITIVE FOR NVIDIA: In a research note late last month, Wells Fargo analyst Aaron Rakers said that Meta's (META) stronger-than-anticipated Capex should be viewed as derivatively positive for Arista (ANET) as Meta is expected to be a 10%-plus customer for Arista in 2022; Nvidia as Meta's specific comments on AI infrastructure investments will likely be taken as an incremental positive data point for the company; AMD (AMD) as he thinks Meta' significant Capex spend should be considered a net-positive for AMD; and Pure Storage (PSTG).

Voicing a similar opinion, Jefferies analyst Mark Lipacis said he views recent positive Capex commentary from Alphabet (GOOGL), Microsoft (MSFT) and Meta as a positive for datacenter semi-names Nvidia, AMD, Broadcom (AVGO), and Marvell (MRVL). He highlighted in particular that Meta said it expects 2023 Capex to increase by 12% year-over-year, versus the Street call for a 5% year-over-year decline. He senses investor caution around Nvidia's datacenter business this quarter but expects all four chip makers named to discuss positive data center trends this earnings season. Lipacis added that he would be a buyer of Nvidia shares in front of the company's earnings call.

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