Nvidia will report third quarter earnings on Nov. 20.
Over the last couple of weeks, investors have been anxiously waiting for various companies to report third-quarter earnings results. Factors including the election and high-profile themes in artificial intelligence (AI) have added an extra layer of ambiguity to this specific earnings season.
For the most part, big tech reports have been pretty solid. But the “Magnificent Seven” member that everyone is most curious about has yet to report: Nvidia (NVDA -1.60%). That will change on Nov. 20.
This particular earnings report could be more meaningful than the usual one. Here’s what investors should be looking for, and my view on whether they should scoop up shares before the highly anticipated data drop takes place.
Why this earnings report is so important
For the last two years, Wall Street analysts and investors who follow Nvidia have been laser-focused on the growth trends in its compute and networking business. In particular, sales related to the company’s data center services and graphics processing units (GPUs) seem to be all anyone wants to talk about.
The upcoming earnings report will be no different. When CEO Jensen Huang and CFO Colette Kress address investors during the earnings call, I can just about guarantee the executives will be peppered with questions about one specific thing: the upcoming launch of its Blackwell chip line, Nvidia’s most powerful GPUs yet.
While early reports have suggested that Blackwell could generate $10 billion in revenue by the end of the year, there’s a finer detail that I would encourage investors to be on the lookout for.
One of Nvidia’s closest partners is IT infrastructure company Super Micro Computer. Supermicro specializes in providing the storage cluster architectures that house GPUs such as those made by Nvidia. However, over the last few months, Supermicro has been at the center of some drama. Namely, the company delayed filing its annual report, and last week was dropped by its auditor.
In response, Nvidia is reportedly moving some of its supply chain efforts away from Supermicro in favor of other IT architecture specialists. While this seems like a logical move to make, I will be curious to see if this transition impacts Nvidia’s financial guidance related to Blackwell in any way.
Image Source: Getty Images.
How does Nvidia stock generally move around its earnings reports?
The chart below traces Nvidia’s stock price over the last two years, with annotations that show when its quarterly reports arrived.
Around the time of its earnings reports, investors can see that Nvidia’s share price tends to experience a bit more volatility and momentum. In my eyes, Nvidia’s commentary around Supermicro and Blackwell could influence the stock price pretty dramatically one way or another.
Think long term
The bigger idea in play here is that Nvidia stock has risen substantially over the last couple of years and that the share price has demonstrated a fair amount of resiliency even after some short-lived sell-offs.
While Nvidia’s multibagger returns over the last couple of years certainly make the stock tempting, investors need to keep in mind that competition in the GPU space is on the rise. Although this won’t be too detrimental to Nvidia, new chips from other vendors could put a dent in the company’s growth down the road.
At the end of the day, I think investors should listen closely to any comments from Nvidia’s leadership related to Blackwell that could help them discern how these new GPUs will fare in the face of rising competition. To me, buying Nvidia ahead of its upcoming earnings report carries too much risk — a move more suited to a short-term trader than a long-term investor.
For that reason, I’d sit on the sidelines with Nvidia for now, and would encourage investors to continue gathering as much information as possible before following the crowd.
Adam Spatacco has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.