Nvidia (NASDAQ:NVDA), the leading chipmaker in the artificial intelligence (AI) space, is set to report its fiscal second-quarter of 2024 earnings on Wednesday, August 23, 2023. The company has been on a stellar run this year, joining the $1 trillion market-cap club and delivering an impressive outlook for the current quarter in May. However, as the expectations are high, can Nvidia deliver another beat-and-raise performance? Here’s what Oppenheimer, one of the top analysts covering the stock, expects from the upcoming earnings release.
Strong Demand for AI Products
Oppenheimer analyst Rick Schafer believes that Nvidia is the “purest scale play on AI adoption” and that the company’s “entrenched DC/AI ecosystem is core to GenAI adoption.” He expects Nvidia to report strong growth in its data center (DC) segment, which accounts for 60% of its revenues, driven by robust demand from cloud service providers (CSPs) and enterprises for AI products. He estimates that DC sales will grow by 85% sequentially and by 108% year-over-year, reaching $3.6 billion in the quarter. He also anticipates that the new Grace and GH200 Grace Hopper superchip, which are expected to launch in the second half of the year, will add more upside to the segment.
Gaming Segment Remains Solid
Schafer also expects Nvidia to report solid results in its gaming segment, which accounts for 31% of its revenues. He projects that gaming sales will increase by 5% sequentially and by 85% year-over-year, reaching $1.9 billion in the quarter. He attributes this growth to strong demand for Nvidia’s GeForce RTX 30 series graphics cards, which offer superior performance and ray tracing capabilities for gamers. He also notes that Nvidia’s gaming segment has a long-term growth potential, as the company continues to innovate and expand its product portfolio with new technologies such as DLSS (deep learning super sampling) and Omniverse (a platform for creating and simulating virtual worlds).
Bullish Outlook and Price Target
Based on his optimistic view of Nvidia’s earnings potential, Schafer maintains an Outperform (i.e., Buy) rating on the stock and raises his price target from $420 to $500. This implies a 9% upside potential from the current trading price of $458. Schafer is not alone in his bullish stance on Nvidia, as most of the other analysts covering the stock also rate it a Buy. Out of 34 total analyst reviews published in the last three months, 32 analysts rated the stock a Buy while only 2 said Hold. Therefore, NVDA is a ‘Strong Buy.’ Meanwhile, the $532.98 average price target suggests that shares could surge 16% in the coming year.
