OpenAI drama and record stock price set the table for key report

NVIDIA (NVDA) is expected to report third-quarter results after the bell Tuesday as Wall Street eagerly awaits an update on the fundamentals behind the artificial intelligence hype cycle.

This report comes after the stock closed at a record high of $504.09 per share on Monday, with AI once again become the story of the moment for investors amidst the ongoing drama surrounding Sam Altman’s departure from ChatGPT maker OpenAI and his decision to join Microsoft (MSFT).

Expectations for the chip giant remain high as the company has become the face of AI history in 2023.

Here’s what Wall Street expects from Nvidia for the quarter, as compiled by Bloomberg, compared to its performance in the same quarter last year.

Income: $16.1 billion expected versus $5.93 billion in third quarter last year
Adjusted EPS: $3.36 expected vs. $0.58 in Q3 last year
Data center revenue: $12.82 billion expected versus $3.83 billion in third quarter last year
Gaming revenue: $2.7 billion expected versus $1.57 billion in third quarter last year

Investors will also focus on the company’s revenue outlook, with Wall Street expecting fourth-quarter guidance to come in at $17.8 billion. Revenue forecasting is where it was in 2023 that the company surprised investors the most.

In August, the stock reached a record high after Nvidia reported second-quarter results that beat Wall Street expectations for revenue and earnings per share, as well as tips that exceeded high estimates. Last May, an analyst described the company’s forecast as « tips for ages« .

“We expect NVDA to beat/increase consensus in its Nov. 21 report,” Bank of America analyst Vivek Arya wrote in a note announcing the earnings release. The company remains positive on the stock, calling the valuation “compelling” and noting that seasonal trends remain favorable.

But the stock stumbled for a few months after its August report as investors began to question Nvidia’s valuation, while updates on chip restrictions in China also questioned assumptions about the final size of the market the company could sell into.

In a SEC Filing After Announcement, the company said it does not expect any short-term impact from the new restrictions. Ruben Roy, analyst at Stifel told Yahoo Finance Live he expects similar comments from Nvidia on Tuesday.

“We believe there is strong demand globally, excluding China,” Roy said. « So, certainly, in the U.S., the big cloud service providers…we think that’s going to continue to be a very big opportunity for Nvidia going forward. But even outside of the U.S. and in regions like Europe, Japan, South Korea., you name it, there’s a lot going on with AI… Nvidia remains, in our opinion, the best way to position ourselves for this growth.

Nvidia has been a driver of stock market momentum this year as a key member of the “Magnificent Seven” stocks, alongside Apple (AAPL), the alphabet (GOOGLE, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META) and Tesla (TSLA).

Together, these actions have gained more than 70% this year until mid-November compared to an increase of 6% for the remaining 493 stocks in the S&P 500.

Julian Emanuel, chief executive of Evercore ISI, noted Sunday that « it’s still NVDA world » and warned investors to prepare for « post-NVDA volatility » regardless of how stocks perform.