Nvidia Earnings In Focus, Chips Stocks Chopping Around
Contributor since 2022 / 194 Followers
Summary:
- Will Nvidia report a record Q2 earnings on Wednesday night?
- August’s heavy dose of macro data cools off this week, allowing investors to take stock of a strong earnings season.
- Certain chipmakers have not navigated the AI boom so well, and one foreign semiconductor company provides a sales update in early September.
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There has been a lot of market drama during August. While the final unofficial month of summer is known for end-of-season getaways among Wall Street executives and traders, an early-month volatility surge and a slew of market-moving macro events have kept investors on edge.
Lately, though, most indicators have come up roses. Sanguine reports include the S&P Global Services PMI, the last few Initial Jobless Claims reports, and the upbeat July Retail Sales update from the U.S. Census Bureau.
Last week, the Quarterly Census of Employment and Wages (QCEW) report published by the BLS made headlines.1 The previous week, analysts at Goldman Sachs put out a report suggesting that upwards of one million jobs could have been erased from payrolls over the April 2023 to March 2024 period.2
Despite a delay in its issuance, the report’s release last Wednesday was a bit subdued in terms of market reaction. Then the following Friday morning, Fed Chair Jay Powell took to the podium to give his annual address from the foothills of the Grand Tetons in Jackson Hole, Wyoming.
Nvidia Back in the Spotlight
Powell’s speech reaffirmed expectations for the start of Fed easing. With the minutes from the July FOMC gathering already out in the open, the bond market largely anticipated Powell’s tone and broad guidance.
Equities, particularly small caps, rallied, nevertheless. While much could depend on how PCE inflation verifies later this week and what the August employment report reveals, attention can be turned back to company-specific news this week such as Nvidia (NASDAQ:NVDA).
The Magnificent Seven stalwart reports its Q2 2025 report this Wednesday evening. The current consensus operating EPS figure stands at $0.63, according to data from Option Research & Technology Services (ORATS). That would be a threefold increase from $0.21 of non-GAAP per-share earnings from the same quarter in 2023.3
Nvidia is important since it’s widely viewed as a key barometer of the health of the AI theme. For nearly two years now, AI has been a significant catalyst helping to push stocks higher. Corporate AI capex has been strong, one of many factors helping to boost overall S&P 500 EPS.4
According to FactSet, US large caps’ earnings growth of 10.9% in Q2 tracks as the highest since the final quarter of 2021. Comps turn tougher for the current quarter, however; analysts expect S&P 500 bottom-line growth of just 4.9%.5 Nvidia results and outlook could help lift the forecast, but a soft assessment of chip demand could lead to a more depressed outlook. So, Wednesday night could be crucial.
It’s Not All Good News for the Tech Darling
And while the $3.1 trillion market cap IT company has beaten on the bottom line in each of the previous six quarters, this might not be a slam dunk of a guide.6 Among a myriad of troubling headlines during the weekend of August 3, there were reports that Nvidia’s next-generation AI chips could be delayed.7
Its Blackwell semiconductors were originally expected to be available this coming January, but concerns rose that they might not be ready until the following spring, according to The Wall Street Journal.8
Nevertheless, the same report mentioned that demand for its current chips was reportedly strong. Shares of the mega-cap dropped from July 10, above $135 per share, to a low of near $90 on August 5. The stock had recovered much of its mid-July to early August drawdown by late last week.
Intel’s Woes
Zooming out, the chips industry has been undergoing changes throughout the year. Intel (INTC) is the worst-performing stock in the Dow Jones Industrial Average this year as the once-preeminent semiconductor company struggles to hold onto market share.9 Back on the afternoon of August 1, Intel posted their Q2 results missing on both the top and bottom lines.10
What’s more, the Santa Clara-based firm announced a plan to cut costs by slashing jobs and suspending its dividend.11 The move comes as many global companies have raised dividends this year. Looking ahead, Intel is slated to present at the Deutsche Bank Technology Conference on Thursday.
2024: A Big Year for Dividend Hikes
Source: Wall Street Horizon
Sales Update from TSM
Finally, let’s do some globe-trotting. Taiwan Semiconductor (TSM) is now the largest publicly traded non-US stock with a market cap of $790 billion.12 It beat on earnings in mid-July, and shares have followed a similar path to that of NVDA.
Though TSM’s next full earnings report isn’t expected until late October (unconfirmed), tech investors may want to mark Tuesday, September 10 on their calendars. That’s when the chipmaker issues its monthly interim sales update, which could offer additional clues on the state of semiconductor demand.
The Bottom Line
After a deluge of macro data impacting expectations for when and by how much the initial rate cut may be, investors have Nvidia front and center this week. Nvidia’s dominating presence is seen in recent actions, just as Taiwan Semiconductor looks to continue its recent success.
1 New data shows US job growth has been far weaker than initially reported | CNN Business, Alicia Wallace, August 21, 2024
2 Fed Confronts Up to a Million US Jobs Vanishing in Revision, Bloomberg, Augusta Saraiva, August 20, 2024
3 NVDA, ORATS, August 22, 2024
4 Breaking Down the Tech Giants’ AI Spending Surge, The Wall Street Journal, Nate Rattner, August 3, 2024
5 Earnings Insight, FactSet, John Butters, August 16, 2024
6 NVDA, ORATS, August 22, 2024
7 Nvidia Reportedly Delays Launch of Next-Gen AI Chips Amid Design Flaw, HPC, Ali Azhar, August 11, 2024
8 Nvidia Investors Grapple With Delay to Next Generation AI Chip, The Wall Street Journal, Tom Dotan, August 5, 2024
9 Dow Jones Industrials Average, Barchart, August 22, 2024
10 Intel Reports Second-Quarter 2024 Financial Results, Intel, August 1, 2024
11 Intel to Cut Jobs and Suspend Dividend in Cost-Saving Push, The Wall Street Journal, Asa Fitch, August 1, 2024
12 iShares MSCI ACWI ex U.S. ETF, iShares, August 21, 2024