Nvidia is seeing 'insatiable' demand, but these are the key questions

By Emily Bary

Ahead of earnings, investors are focused on the Blackwell ramp, prospect of an 'air pocket' and margin trends

Once again, investors will look long-term when Nvidia Corp. reports results next week.

It's pretty well-established that the company is seeing "insatiable" demand for artificial-intelligence accelerators, Oppenheimer Rick Schafer noted, adding that he and most others expect to see another beat-and-raise quarter from Nvidia (NVDA) when it reports quarterly earnings on Wednesday afternoon.

But Wall Street seems less concerned with the present as Nvidia prepares to start shipping its new Blackwell chip lineup later this year.

"The bar is quite high for NVDA, but the level of the beat-and-raise likely takes a backseat to the ramp of the GB200 NVL and next year," Jefferies analyst Blayne Curtis wrote, referring to the company's Grace Blackwell exascale computer.

Read: Nvidia CEO Jensen Huang saw his pay jump 60% last year, topping what rivals made

Plus, one term that gets thrown around in discussing Nvidia lately is "air pocket." In other words, investors want to know whether there will be a demand speed bump of sorts as customers prepare for the Blackwell launch.

"Concerns of an air pocket ahead of Blackwell was a frequent concern we heard post our launch, but we don't see any signs of that with [cloud service providers] still catching up on supply and a long tail of customers behind them who could not get product last year," Curtis wrote. "We believe the ramp of the GB200 NVL products is a large driver for the story as NVDA will once again extend their control to a greater portion of the AI system design."

But BofA Securities' Vivek Arya wrote of the potential for Nvidia shares to be "volatile" in the short term, owing in part to "quarterly deceleration ahead of Blackwell."

Arya added that, even though some investors anticipate nearly $28 billion in sales guidance for the ongoing quarter - above the consensus view of $26.5 billion - "the stock could still react unfavorably" to an outlook that meets those bullish expectations.

See also: Here's what Nvidia earnings need to show to be 'good enough' for Wall Street

That's because sequential sales growth could decelerate to somewhere in the 7% to 8% range for the July quarter, "well below the mid-teens or better [rate] the last few quarters," he wrote.

Further, investors will be monitoring gross margins to see if they peaked. Arya flagged that a "decline is a sign of pricing pressure, unfavorable mix (more China H20 shipments and/or more inference units) and slowing demand/easing supply."

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-Emily Bary

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05-17-24 1010ET

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