Earnings Report Preview | NVIDIA, the shovel seller, continues to benefit from AI. Can it further boost the US stock market?

Zhitong App has learned that NVIDIA (NVDA.US) will announce its fourth-quarter earnings for the 2024 fiscal year on February 22nd Beijing time. It is expected that NVIDIA will benefit significantly from the prosperity of AI, with profits and revenue expected to increase substantially. The market anticipates NVIDIA's Q4 revenue to be $20.38 billion, a 237% year-on-year growth; the estimated earnings per share are $4.18, compared to $0.57 in the same period last year. The net profit is expected to be $10.4 billion, higher than the $1.41 billion in the same period last year. Key Indicator: Data Center Business In November last year, NVIDIA's third-quarter earnings soared beyond expectations, driven by the growth of its data center business providing cloud and AI services. In the third quarter, the revenue from the data center division reached a historical high of $14.51 billion. According to Visible Alpha's expectations, the revenue of this business in the fourth quarter could reach $16.86 billion. This would be more than four times that of NVIDIA in the same period last year. Strong Growth in Data Center Business Establishing a New Custom Chip Division NVIDIA's stock price has recently reached record highs, with reports indicating that the chip manufacturer plans to launch a new business division focused on custom chips. During the earnings conference call, the chip manufacturer may provide more details about the new business division, which could help NVIDIA gain a foothold in the growing custom chip market and solidify its position as the world's most valuable chip company amidst the AI boom. Several other chip companies, including Arm, Micron Technology, AMD, and Intel, have reported performance that exceeded expectations driven by the demand for AI. Since the beginning of 2024, NVIDIA's stock price has risen by over 50%, and in 2023, it more than doubled. According to FactSet's forecast, NVIDIA is expected to be one of the major contributors to earnings growth for S&P 500 component companies in the first quarter of 2024. Can it continue to drive the S&P 500 higher? Goldman Sachs stated that NVIDIA's performance this week "could be the most important single stock earnings report in years." Brian Garrett, Managing Director of Cross-Asset Sales at Goldman Sachs, stated that NVIDIA's potential upside is 11%. "The market value, whether profitable or not, is equivalent to the market value of the 37th stock in the S&P 500 (over $200 billion)." Garrett pointed out that the last time this happened (in 2021) marked a "pretty good peak" for the S&P 500 index, although he also noted that the Federal Reserve was on a "different warpath" at that time. Garrett also emphasized the strong demand from retail investors for call options, with nearly 60% of all options traded in the market being call options. This is one of the highest proportions since 2021. At the same time, the Google search volume for "call options" hit a two-year high.