Trends are trends because they come and go, with the world of investing and markets certainly no exception.
In 2020, it was work from home. In 2021, it was the Great Reopening. In 2022, it was crypto and digital assets, and a bit of ESG. The year 2023 was all about the Magnificent Seven. And this year? Clearly, artificial intelligence, with global leader Nvidia (NVDA) at the top.
A quick look at the attention and coverage Nvidia receives in the run-up to its quarterly earnings cinches it as the stock of 2024. It has also quickly catapulted the company into rarified air, where analysts and investors continuously place surreal expectations on how much the company is selling, how much it’s expected to sell, and how much demand there will be for its AI-focused chips.
Its most recent earnings report was no exception, with Superbowl-like media coverage leading up to and following the numbers on Wednesday.
There’s little question why: Nvidia is clearly the King of AI, with massive, household-name customers like Microsoft (MSFT), Google (GOOG), Amazon (AMZN), and more scooping up its semiconductors and hardware at a ferocious clip to amp up their AI-driven offerings.
But when it comes to investing, it is very much about the potential. Despite Nvidia blowing past expectations for the quarter and issuing better-than-expected guidance, the stock temporarily stumbled. Investors were either taking profits from prior investments in the stock or were soured on the fact that the gains — a 94% increase in sales for the three-month period — weren’t what they used to be.
Nvidia previously reported growth of 122% in the second quarter, 262% in the first quarter, and 265% in the fourth quarter of 2023.
AI believers argue that the world is only at the beginning of transitioning to the next level of computing, where large language models and algorithms process faster and deeper than ever before. And Nvidia believers argue that Nvidia is leaps and bounds beyond its competition in supplying the needed chips and hardware.
“We are in the very, very early stages of a transformational moment in computing,” Creative Strategies’ director of consumer technology practice Ben Bajarin told Yahoo Finance on Thursday following the earnings report.
On the flip side, some analysts are suspicious about whether Nvidia’s customers, including Meta (META), Microsoft, and Google, can make back the billions they’re spending on AI hardware.
Nvidia’s ability to keep up with demand for its highly sought-after Blackwell chip is also giving some analysts pause, including Emarketer’s Jacob Bourne.
“Critical questions around Blackwell’s production ramp and customer concentration remain key concerns,” Bourne said in a note. “There’s little room for execution missteps in 2025.”
There is also political uncertainty, given Donald Trump’s threat to put blanket tariffs on products from around the world, including chips and components produced outside of the US, specifically those made in Taiwan. Trump has stated that companies like TSMC that currently produce chips for Nvidia and others in Taiwan would be incentivized to construct chip manufacturing plants, or fabs, in the US to avoid having to pay tariffs.
For the most part, investors and analysts seem to be more than prepared to continue betting on Nvidia into 2025. Year to date, the stock is up more than 210%.
That said, expectations for the next quarter are already up there: Revenue for the quarter ending in January 2025 is expected to come in at $38 billion, according to the average of 40 analyst estimates tracked by Yahoo Finance, up from $35.1 billion in the most recent quarter.
Of course, there is no such thing as insatiable demand, and there will come a time when AI development may overtake AI execution. Even before that point, investors and Wall Street will very likely have already reassessed and adjusted their expectations for future Nvidia sales and earnings.
Check out more Nvidia analysis from Yahoo Finance
The bigger question is whether AI in and of itself will transform computing over the long term or whether it’s just another investing trend. Does anyone remember the term “Big Data”?
Corey Goldman is a senior editorial consultant for Yahoo Finance. Follow Goldman on Twitter/X @mcoreygoldman.
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