Nvidia Earnings Preview: AI Spending, Financing And Memory Costs In Focus

Nvidia Corp's quarterly results are set to be the latest test of investor confidence in the artificial intelligence (AI) trade, with markets looking beyond the chipmaker’s headline numbers to its outlook for AI spending, customer demand and the cost of building data centres.

Wall Street expects Nvidia to report stellar fiscal second-quarter results for the period ended July 31, with revenue projected to have nearly doubled from a year earlier, as per a report by Bloomberg (BBG).

Net income is also expected to have almost doubled, which would reportedly mark the fastest revenue growth in two years.

Investors are expected to focus on management commentary about hyperscaler capital spending, enterprise demand and orders for Nvidia’s Blackwell and next-generation Rubin systems, as per the BBG report.

Options markets are pricing a 5.4% move in Nvidia shares in either direction on Thursday, implying a potential swing of about $280 billion in market value, as per a report by Reuters.

That expected move is below the 6.5% move priced ahead of its May results and Nvidia’s 7.4% average post-earnings move over the past 12 quarters, according to Option Research & Technology Services (ORATS) data cited by Reuters.

Nvidia shares have fallen for seven consecutive trading sessions, although the stock was still up around 12.81% this year to date.

The key question, according to a report by Business Insider (BI), is whether customers are continuing to accelerate spending or becoming more selective.

Financing Raises Fresh Questions

Nvidia’s expanding role in financing AI infrastructure is also expected to draw scrutiny.

The company has partnered with major financial institutions on financing platforms targeting more than $500 billion of AI infrastructure.

Investors want clarity on whether such arrangements are helping create additional demand or bringing forward spending that customers would have undertaken anyway.

"This will be a very interesting (earnings) report, but it isn’t so much about the numbers," said Rob Conzo, CEO of Wealth Alliance, which owns Nvidia shares in several portfolios, as per BBG.

"The forward guidance discussions will be far more in view," he said, adding, "Nvidia is the best barometer for AI spending."

Nvidia has also agreed to spend as much as $105 billion backing an Ohio data centre campus that will be leased by OpenAI. It also announced partnering with Wall Street firms such as Goldman Sachs, BlackRock, and Apollo Global Management for building AI infrastructure, agreeing to provide $500 billion in financing.

According to Janus Henderson's senior analyst Shaon Baqui, the company needs to discuss these two big partnerships or agreements "in good detail and sort of calm the market’s fears around the circularity of financing," reported BBG.

Memory Costs And Competition In Focus

According to Business Insider, investors will also want to know how the global memory shortage is affecting Nvidia’s customers and margins.

Some customers have been reportedly told server prices could rise by more than 15% because of surging memory costs.

Competition and the wider semiconductor cycle will provide another backdrop. Nvidia’s demand outlook could influence sentiment towards AMD, Broadcom, Marvell and TSMC, while momentum has recently shifted towards memory, storage, optical and energy infrastructure, the reports said.

Investors will also watch Nvidia’s revenue guidance, chip demand and profit margins. A strong outlook could revive the broader AI trade, while weaker guidance or concerns over spending discipline could put further pressure on the sector, as per Reuters.