What can be said about Nvidia (NVDA) that has not already been said? With year-to-date stock gains of close to 240%, crushing the 17% rise in the S&P 500 index, the market has run out of superlatives.

Expanding that horizon by one year and three years, the graphics chip giant has skyrocketed 210% and 265%, respectively. For investors who are thinking of taking profits, doing so could prove premature. Despite the strong stock performance, the shares still somehow appear cheap, because as the stock has risen, the company continue to raise its profit forecast. There’s a chance it can do so again when it reports third quarter fiscal 2024 earnings results after Wednesday’s closing bell.

The graphics chip powerhouse has proven that the euphoria surrounding artificial intelligence (AI) and generative AI is more than hype. Unveiled in 2022, Nvidia’s generative AI accelerators have already seized market share from competitors who are only in the development stage. Nvidia’s expected growth for its GPU datacenter accelerators has spiked amid generative AI models such as ChatGPT in which Microsoft (MSFT) has made a significant investment via its partnership with OpenAI.

In a note to clients after its Q2 results, Wedbush Securities analyst Dan Ives said the results are a “historical moment for the broader tech sector,” likening Nvidia’s guidance and commentary to that of a “drop the mic” moment. There is likely to be continued datacenter revenue acceleration for many quarters to come, underscoring the opportunity within AI is still at a nascent stage. But to continue to the stock’s upward trend, the company on Wednesday must continue to tout its growth prospects for the next quarter and beyond.

For the three months that ended September, Wall Street expects the Santa Clara, Calif.-based company to earn $3.10 per share on revenue of $14.89 billion. This compares to the year-ago quarter when earnings came to 58 cents per share on revenue of $5.93 billion. For the full year, ending in December, earnings of $10.02 per share would rise 200% year over year, while full-year revenue of $50.68 billion would rise 88% year over year.

The expected revenue and earnings growth for the quarter and full year has tech investors gushing over Nvidia. Nvidia’s second quarter numbers and Q3 guidance suggests there is a sort of relentless demand for AI, especially in the datacenter, where the company’s revenue surged three-fold on a year-over-year basis. In the second quarter, Nvidia reported adjusted EPS of $2.70, which breezed past analysts’s expectations by a whopping 30%.

For some context, Nvidia not only blew away its own guidance of $2.07, the consensus estimate for this quarter a year ago was a modest $1.07 per share. Q2 revenue also crushed Street estimates by a staggering 22%, coming in at $13.51 billion while the Street was looking for $11.1 billion. Aside from growing demand for generative AI, the revenue growth was driven by large language models utilizing Nvidia’s GPUs.

“The October quarter guidance of $16 billion was well above $12.6 billion estimates and quickly rising whisper numbers on the Street and will be fuel in the engine to ignite a tech rally we see continuing into the rest of the year,” Ives wrote. As a result, analysts are projecting NVDA stock to go even higher. The stock has a consensus price target of $580; from current levels of $493, that assumes additional premiums of close to 20%.

With the growing adoption of cloud-based solutions and growing demand for generative AI, Nvidia continues to enjoy tailwinds. Combined with rising margins and quarterly free cash flow, it would be a mistake to part with the stock ahead of Wednesday’s results.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Original: Earnings Feed: Nvidia (NVDA) Q3 2024 Earnings: What to Expect