All eyes are on Nvidia as it prepares to report its earnings. Here's what to expect

President and CEO of Nvidia Corporation Jensen Huang delivers a speech during the Computex 2024 exhibition in Taipei, Taiwan, Sunday, June 2, 2024. (Chiang Ying-ying / AP Photo)

LOS ANGELES -

Nvidia has led the artificial intelligence boom to become one of the stock market’s biggest companies, as tech giants continue to spend heavily on the company's chips and data centers needed to train and operate their AI systems.

The company is now worth over US$3 trillion, with its dominance as a chipmaker cementing Nvidia’s place as the poster child of the AI industry ahead of the release of its latest financial results after the close of trading Wednesday.

Wall Street expects the company to report second-quarter adjusted earnings of 65 cents per share up from 27 cents a year ago. Revenue is expected to have surged to US$28.74 billion, more than double what it earned in the comparable quarter one year ago. By comparison, S&P 500 companies overall are expected to deliver just 5five per cent growth in revenue for the quarter, according to FactSet.

The problem, critics say, is such stellar growth has set off too much euphoria among investors. Through the year’s first six months, Nvidia’s stock soared nearly 150 per cent. At that point, the stock was trading at a little more than 100 times the company’s earnings over the prior 12 months. That’s much more expensive than it’s been historically and than the S&P 500 in general. That's why analysts warn of a selloff if Wall Street sees any indication that AI demand is waning.

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Demand for generative AI products that can compose documents, make images and serve as personal assistants has fueled sales of Nvidia’s specialized chips over the last year. In the past three quarters, Nvidia’s revenue has more than tripled on an annual basis, with the vast majority of growth coming from the data centre business.

The Santa Clara, California-based company carved out an early lead in AI applications race, in part because of founder and CEO Jensen Huang's successful bet on the chip technology used to fuel the industry. The company is no stranger to big bets. Nvidia’s invention of the graphics processor unit, or GPU, in 1999 helped spark the growth of the PC gaming market and redefined computer graphics.