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Nvidia (NVDA) is scheduled to report results of its third fiscal quarter after the market close on Tuesday, November 21, with a conference call scheduled for 5:00 pm ET. What to watch for:

UPSIDE EXPECTED: In a research note ahead of earnings, Oppenheimer said it expects upside results and outlook as supply gradually improves against what we estimate is 20% "excess" demand. Adv-packaging is pinch-point and likely gates upside magnitude. The firm also noted that supply constraints should ease quarter-over-quarter through next year as TSMC CoWoS capacity increases 20% near-term and at least doubles exiting 2024. U.S. government tightened China export rules on October 17th, restricting sale of A100, H100, A800, H800, L40, L40S, and RTX 4090, and management has announced that HGX20, L2 PCIe and L20 PCIe to comply with restrictions. Oppenheimer believes new SKUs may still be subject to government approval/licensing. Further, the firm sees room for continued gross margin expansion into the mid-70%s as DC leads growth. Oppenheimer reiterated an Outperform rating on the shares with a price target of $650.

SOFTWARE MONETIZATION: Wells Fargo said earlier this month that it believes software monetization should become an increasingly visible next phase in Nvidia's platform growth strategy. The firm currently estimates a potential software-only revenue at $4B-$5B/annum with a $2B-$3B EBIT contribution over the next few years. Wells thinks Nvidia's software monetization can drive $30/share value creation. The three big drivers of Nvidia's software monetization, in the firm's view, include AI Enterprise Software Suite, Omniverse Enterprise, and Nvidia DRIVE. Wells has an Overweight rating on the shares with a price target of $600.

PRODUCT ANNOUNCEMENTS: Last week, Nvidia announced that Jupiter - which launches a new class of supercomputers for AI-driven scientific breakthroughs - will be powered by the Nvidia Grace Hopper accelerated computing architecture to deliver extreme-scale computing power for AI and simulation workloads. Jupiter - which is owned by the EuroHPC Joint Undertaking and contracted to Eviden and ParTec - is being built in collaboration with Nvidia, ParTec, Eviden and SiPearl to accelerate the creation of foundational AI models in climate and weather research, material science, drug discovery, industrial engineering and quantum computing.

Nvidia also said it has "supercharged the world's leading AI computing platform with the introduction of the NVIDIA HGX H200." Based on Nvidia Hopper architecture, the platform features the Nvidia H200 Tensor Core GPU with advanced memory to handle massive amounts of data for generative AI and high performance computing workloads. H200-powered systems from server manufacturers and cloud service providers are expected to begin shipping in Q2 2024. Amazon Web Services (AMZN), Google Cloud (GOOGL), Microsoft Azure (MSFT) and Oracle Cloud Infrastructure (ORCL) will be among the first cloud service providers to deploy H200-based instances starting next year, in addition to CoreWeave, Lambda and Vultr.

After Nvidia announced its H200 GPU at Supercomputing 2023, or SC23, and provided additional details on its Grace Hopper GH200 Superchip, a higher performance version of the H100 that utilizes HBM3e memory to drive higher performance, Wolfe Research noted that Nvidia has not refreshed prior datacenter GPUs in the past and points to the news as "further evidence of NVDA accelerating their product cadence in response to AI market growth and performance requirements." The firm, which sees this further expanding Nvidia's competitive moat, has an Outperform rating and $630 price target on the shares.

Following the keynote at Supercomputing 23, where Nvidia announced the HGX H200 AI accelerator, an upgrade to current the H100, BofA noted that the H200 is compatible with its predecessor H100 installations, enabling faster time to market and is "critical" as hyperscalers do not need to invest to reconfigure their existing hardware platform. Upgrade simplicity only adds to the competitive portfolio Nvidia holds, says the firm, which maintain a Buy rating and $650 price target on "top pick" Nvidia following the SC23 show keynote.

OUTLOOK: During the company's last earnings call, Nvidia said it saw Q3 revenue of $16B, plus or minus 2%, with consensus at $16.18B. The company also said GAAP and non-GAAP gross margins was expected to be 71.5% and 72.5%, respectively, plus or minus 50 basis points; GAAP and non-GAAP operating expenses to be approximately $2.95B and $2.00B, respectively; GAAP and non-GAAP other income and expense to be an income of approximately $100M, excluding gains and losses from non-affiliated investments; GAAP and non-GAAP tax rates to be 14.5%, plus or minus 1%, excluding any discrete items.

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