Nvidia investors, AI boosters await key earnings report
Nvidia investors, AI boosters await key earnings report
We get earnings reports from publicly traded companies every quarter. They’re essentially a set of metrics that illustrate a company’s financial performance, which investors typically compare to Wall Street’s estimates.
Most of them come and go without much fanfare. But this week, we’ll see a report from a company that everybody seems to be watching. It’s already making headlines, and the numbers don’t even come out until Wednesday.
The company is Nvidia — a tech giant, chipmaker and bellwether for the artificial intelligence industry. But, still, it’s just an earnings report.
There are two main reasons to watch Nvidia, said Erik Gordon, a professor at the University of Michigan’s business school. “The first is its sheer size and its influence on the stock market.”
Gordon said last year, Nvidia’s stock contributed 22% of the S&P 500’s total gain. The other reason? “Nvidia’s sort of the poster stock of AI. It’s the way most of us can invest in AI.”
Nvidia’s success is based on its graphics processing units, or GPUs, making up around 90% of its market.
“During the dot-com era, there was something like 2,888 startups that went public. So far, there have been zero startups that have gone public for generative AI,” said Peter Cohan, professor of management practice at Babson College and author of a book on generative AI.
That’s not normal, said Cohan.
Nvidia became such a gorilla in part because it got its start long before AI took off. Cohan said its GPUs were originally used for gaming.
“Then used for crypto mining, and now it has proliferated to be used by data centers that are training and operating large language models like ChatGPT,” said Cohan.
Nvidia’s report this week is drawing even more attention than usual because more analysts have raised questions about its continued dominance. One problem, said Matt Bryson of Wedbush Securities: DeepSeek, a Chinese AI company, made a splash with its AI model and chatbot in January.
“China’s development suggested that you can do more with fewer hardware resources, so in this case, fewer Nvidia GPUs,” said Bryson.
Nvidia’s stock plunged 17% after DeepSeek’s announcement. The second point of vulnerability is Nvidia’s new so-called Superchip for the next generation of AI.
“There have been some fits and starts in terms of production,” said Bryson.
But Bryson isn’t concerned. He said the new chip is ramping up after a slow start, and if DeepSeek makes AI more affordable to more companies, it could actually increase demand for AI hardware.
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