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Nvidia (NVDA) is scheduled to report results of its fourth fiscal quarter after the market close on Wednesday, February 22, with a conference call scheduled for 5:00 pm ET. What to watch for:

BULLISH AHEAD OF EARNINGS: Piper Sandler raised the firm's price target on Nvidia to $225 from $200, while keeping an Overweight rating on the shares. The firm is bullish going into Nvidia's January quarter results and April quarter guidance. Piper further believes management will call for a bottom in its data center business during the April quarter and that artificial intelligence growth is still in the earning innings.

BMO Capital also raised the firm's price target on Nvidia to $240 from $210, maintaining an Outperform rating on the shares ahead of its Q4 results. The firm’s research suggests an increasing weaker environment for Nvidia’s Data Center business, particularly as it relates to Q1 and Q2, but beyond the near-term, BMO Capital sees a "potentially meaningful multi-billion dollar opportunity" emerging for the company in generative AI.

ON THE SIDELINES AHEAD OF RESULTS: Noting that ChatGPT has changed the conversation around artificial intelligence, Wedbush said in a pre-earnings research note that it believes that the proliferation of AI will benefit the larger semiconductor complex and particularly Nvidia given the dominant position it has established within the data center market. Having said this, even if AI spend trends better than overall IT spending in 2023, the firm is less certain that Nvidia can sidestep the downtick seen in general IT budgets by delivering and guiding to accelerating sequential growth through the course of the coming fiscal year. Specifically, Wedbush thinks that hyperscalers are currently working to draw down inventory, a result that generally is weighing on server requirements. And with cloud spend slowing, it sees this process as more likely to be prolonged.

Similarly, the firm believes enterprise spend is also declining into 2023 as budgets are reset with the more difficult macro in mind. Net, while Wedbush expects Nvidia Data Center sales to outperform the broader market, it is less certain results will support heightened expectations. Further, the firm sees a somewhat similar setup in gaming with both puts and takes likely to impact Nvidia's results and guidance. Wedbush has a Neutral rating on the shares with a price target of $175.

Also keeping a Hold rating on the shares, Stifel raised the firm's price target on Nvidia to $207 from $175. The firm is expecting results broadly in line with consensus expectations and is also expecting a positive tone relative to April quarter guidance, but visibility beyond fiscal Q1 is likely limited with hyperscale customers continuing to assess capex allocation and China demand. While Stifel believes that AI-focused spending is likely to remain a priority, it is wary of expectations for significant slowing in overall data center capex spending in 2023.

Additionally, Morgan Stanley raised the firm's price target on Nvidia to $246 from $175 but kept an Equal Weight rating. The firm's sense is that anxiety for the data center business is easing and it sees Nvidia posting an in-line quarter and outlook with gaming recovering from the lows. The biggest question in the quarter will be how the company will be impacted by data center spending cuts, said the firm, which believes Nvidia has been impacted in some areas, but also notes other areas where spending is well protected given what is "suddenly an intensified focus on large language models" driven by AI.

WHAT’S NOTABLE: Earlier this week, Microsoft (MSFT) and Nvidia announced the companies have agreed to a 10-year partnership to bring Xbox PC games to the Nvidia GeForce NOW cloud gaming service, which has more than 25 million members in over 100 countries. "The agreement will enable gamers to stream Xbox PC titles from GeForce NOW to PCs, macOS, Chromebooks, smartphones and other devices. It will also enable Activision Blizzard PC titles, such as Call of Duty, to be streamed on GeForce NOW after Microsoft's acquisition of Activision closes... The partnership delivers increased choice to gamers and resolves NVIDIA's concerns with Microsoft's acquisition of Activision Blizzard (ATVI). NVIDIA, therefore, is offering its full support for regulatory approval of the acquisition," Microsoft stated.

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