Nasdaq 100 Analysis: Where Next For Nvidia Stock Ahead Of Q1 Earnings?

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Nvidia will have to impress the markets if it wants to maintain its lofty valuation that is underpinned by high expectations around AI.

When will Nvidia release Q1 earnings?

Nvidia is scheduled to release first-quarter earnings after US markets close on Wednesday, May 24.

Nvidia Q1 earnings consensus

Revenue is forecast to experience a year-on-year fall of 21.5% to $6.5 billion and adjusted EPS is expected to drop 32.5% to $0.92. 

Nvidia Q1 earnings preview

Nvidia has been the best performer in the Nasdaq 100 and S&P 500 this year after more than doubling in value, significantly outperforming its peers and now trading at a huge premium to its rivals. In fact, its blended forward price-to-earnings ratio sits at 61.0x – more than double the industry average! 

That stellar performance has happened despite the fact revenue and earnings continue to decline. Revenue is set to drop for a third consecutive quarter while earnings will drop for a fourth straight quarter thanks to the unraveling of demand we have seen in gaming and other markets and slower growth from its core data center business.

The rally in Nvidia shares this year reflects the fact that markets have banked on a recovery in the second half of 2023. Wall Street anticipates both revenue and earnings will return to growth in the current quarter, which will place pressure on the outlook in order to keep the recovery story alive. With that in mind, analysts are looking for Nvidia to target $7.1 billion in revenue in the second quarter.

Investors hope the contraction we have seen in the gaming market over the past year when we have seen the boom in demand during the pandemic unwind and the market oversupplied with chips, will ease before returning to growth in the second half of 2023. Commentaries from peers like AMD and Intel suggest that recovery remains on course.

But it will be the data center segment will be the most closely watched. Markets will hope that the launch of its H100 last year will help the unit keep growing and it is the division poised to benefit the most from the eruption of interest in artificial intelligence.

A considerable chunk of the value added to Nvidia’s market cap this year has been attributed to the huge excitement about the prospects coming from artificial intelligence, with Nvidia being touted as a major beneficiary as it provides the computing power needed for the energy-hungry technology. Nvidia has said it expects to be generating significant revenue from AI applications over the coming year, so investors will want to see evidence that it is gaining traction.

Nvidia’s valuation is bloated and that sets the bar high for the chipmaker to deliver if it is to avoid the rally from reversing. Any signal that its core markets will recover at a slower pace or a failure to demonstrate that AI is starting to be a game-changer would not be well-received by markets.

Where next for NVDA stock?

Nvidia shares hit their highest level since late 2021 last week before losing ground on Friday, with the stock following other chipmakers lower today as markets react to the news that fellow semiconductor stock Micron Technology, which makes memory chips, has been banned from supplying equipment for key infrastructure projects in China on national security grounds.

On the upside, all three moving averages are trending higher and the share price is following an uptrend that started in early 2023. The immediate job is to reclaim the highs we saw last week at $316.80 before it can look to climb toward $323, then $324 before the all-time highs we saw last November come back onto the radar.

On the downside, we can the RSI slipped into overbought territory when it climbed to those highs last week, suggesting it could find it more difficult to find higher ground going forward. The supportive trendline will remain intact even if the stock slips down toward $292, in line with the resistance we saw during the first half of May, with the 50-day moving average there to provide a safety net if needed.

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Can NVIDIA stock keep up the momentum after doubling in value in 2023?

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