Nvidia Earnings On The Horizon: Can The Semi Rally Continue?

My favorite semiconductor pick, Nvidia (NVDA - Free Report), is releasing its Q3 earnings after the bell Thursday, November 14th. This report is on the heels of a strong resurgence back into the chip maker’s space. Industry leaders Intel (INTC - Free Report) and TSMC (TSM - Free Report) both put year-over-year growth back on their income statements in earnings releases last month, propelling the sector to all-time highs.

Nvidia's primary competitor in the GPU space, AMD, reported earnings at the end of October. The company missed revenue estimates and just barely met EPS expectations, though the market is still bought up this chipmaker's shares.

AMD is up almost 14% since its earnings report, and the reasoning its year-over-year growth in GPU and CPU segments. Whether this means it gained market share or the market itself is expanding will be illustrated in Nvidia's earnings tomorrow evening.

NVDA is up almost 20% since the beginning of October, far outperforming the sector and the broader market. The market has priced in a strong Q3 report following good results from its cohorts. Now the question is whether or not Nvidia can meet the market's sizable expectations in their report tomorrow?

NVDA has the potential to be a big mover on earnings, with two substantial double-digit moves in the past 10 quarterly reports. Zacks Consensus estimates for Q3 are an EPS of $1.24 on sales of $2.9 billion, which would represent a decline in both metrics.

The semiconductor industry has seen a cyclical decline as customers needed time to digest its most recently acquired tech. This chip demand stall is coming to an end, and growth is coming back into the space propelling stock prices up. 

The Business

Nvidia invented the GPU and is the largest producer of GPUs globally. For those of you who don't know, GPU stands for graphics processing unit with its primary function being to render images. Nvidia's high-quality GPU's are unmatched in functionality, though AMD typically beats them on price point. Nvidia's chips are beginning to have utility far beyond just rendering images with its speed and functionality become essential in machine learning and the development of AI.

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