Nvidia shares rallied on AI spending ahead of Nvidia Q3 earnings 2024

Nvidia shares rose nearly 5% on Tuesday, following bullish notes from Wall Street analysts citing strong chip demand ahead of its earnings report set for Wednesday afternoon.

Analysts Boost Nvidia Price Targets Amid Strong AI Demand

This week, Stifel analyst Ruben Roy increased his price target for Nvidia from $165 to $180, while Truist Securities' William Stein raised his target from $148 to $167.

Roy mentioned that his decision was based on "a diverse set of data points," noting the ongoing strong investment in AI infrastructure by hyperscalers and robust demand for Nvidia's latest Blackwell AI chips.

He added, "We believe that NVDA is well positioned in markets that together represent an overall total addressable market (TAM) exceeding $100 billion by the end of 2025, with a potential long-term opportunity that could near $1 trillion."

Nvidia Shares Rise as Nebius Group Launches First U.S. GPU Cluster with 35,000 Chips
Nvidia's stock saw an increase following the announcement that Nebius Group (NBIS), a cloud provider, will be launching its first GPU cluster in the U.S., utilizing up to 35,000 Nvidia chips. A GPU cluster consists of a network of graphics processing units, or AI chips, that provide significant computing power for training and running artificial intelligence software.

To put this in perspective, Nebius' order for 35,000 Nvidia chips represents approximately 4% of the total volume of Hopper AI chips that Wall Street analysts predict Nvidia will ship during the October period, according to Bloomberg consensus data.

Nvidia's stock rebound follows a decline the previous day due to a report from The Information regarding overheating problems with its Blackwell AI servers. In August, Nvidia was reportedly addressing design flaws related to the Blackwell chips, which led to a delay in the production ramp, now scheduled for the January quarter.

The company has not confirmed any overheating issues with its Blackwell servers. In a statement to Yahoo Finance on Monday, Nvidia indicated that "engineering iterations are normal and expected."

What To Expect about Nvidia (NVDA) Q3 Earnings

Leading graphics chip designer Nvidia (NASDAQ: NVDA) is set to report its earnings tomorrow after the market closes. Here’s what you should know.

Last quarter, Nvidia surpassed analysts' revenue expectations by 4.5%, posting revenues of $30.04 billion—an increase of 122% year over year. It was a standout quarter for the company, marked by a notable improvement in inventory levels and a significant beat on analysts' earnings per share (EPS) estimates.

This quarter, analysts are expecting Nvidia’s revenue to grow 82.7% year on year to $33.1 billion, slowing from the 206% increase it recorded in the same quarter last year. Adjusted earnings are expected to come in at $0.75 per share.

Most analysts covering Nvidia have reaffirmed their estimates in the past 30 days, indicating they expect the company to maintain its momentum heading into earnings. Nvidia has a strong track record of surpassing Wall Street's expectations, having exceeded revenue estimates every quarter for the past two years by an average of 8.1%.

Examining Nvidia's peers in the processors and graphics chips sector, several have already released their Q3 results, providing insights into potential trends. Qualcomm reported year-over-year revenue growth of 18.7%, beating analysts' expectations by 3.1%, while Qorvo experienced a revenue decline of 5.2% but still exceeded estimates by 1.8%. Following their results, Qualcomm's stock remained stable, whereas Qorvo's shares dropped by 27.4%.