Prepare Yourself: Upcoming Week to Bring Another Wave of Negative Nvidia Stock News
Nvidia Faces 'Last Wave of Negative News' in Q1 Earnings Report: Analysts
Nvidia (NVDA) is set to release its fiscal first-quarter earnings report after the market closes today, and Wall Street analysts at Piper Sandler predict the results could signal the end of prolonged difficulties for the tech giant. Analyst Harsh Kumar anticipates that a one-time inventory charge tied to China-related H20 restrictions and a decrease in guidance for the July quarter will contribute to the anticipated "negative news."
In a previous note, Kumar cautioned that the worst-case scenario could drive NVDA stock down to $77.
Despite potential disappointing figures that could trigger a swift selloff, Nvidia's quarterly results could also surpass expectations and continue the ongoing rally. Alternatively, the numbers might stabilize the stock price between $120 and $140.
Piper Sandler Sees a Challenging Quarter Ahead
Piper Sandler forecasts that Nvidia will just barely meet the $43 billion consensus revenue estimate, owing to the U.S. blocking around $5.5 billion worth of H20 AI-accelerator inventory destined for China. By recording the majority of the ensuing charge now, the financial figures could appear unfavorable, and guidance for the July quarter could drop to the low $40 billion range. Such an impact would clear up the negative news in one fell swoop while setting the stage for a resurgence in hyperscaler spending, sovereign-AI agreements, and the launch of China-compliant chip production in the second half.
Morgan Stanley, in a separate note, considers past consensus estimates outdated and warns of potential downside risk if the leadership team remains secretive. Coupled with renewed tariffs, unstable cloud budgets, and lingering concerns that AI spending might slow, the circumstances paint a picture of a tumultuous quarterly report.
Nevertheless, Piper Sandler keeps an "Overweight" rating and a $150 price target, implying a possible increase of 10% from current levels. The firm's confidence lies in the massive long-term capital-expenditure plans still in place, positioning Nvidia as the top pick for AI exposure.
What Could Go Right or Wrong
Bullish investors believe that Nvidia has exceeded analyst estimates in ten straight quarters and could achieve a successful eleventh. Street expectations currently account for a margin decrease that might prove too harsh if the China charge is less severe than estimated or if demand for sovereign-AI increases at a more rapid pace than expected. Wedbush, Oppenheimer, and approximately 93% of analysts still view the stock as a "Buy."
Even an outstanding print may fail to rejuvenate sentiment if management hints at a temporary freeze in capital spending during the second half of 2025. According to Piper Sandler, such a slowdown could trim 6.45% of Nvidia's annual data-center revenue, equating to roughly $9.8 billion and $0.40 per share in earnings. Additionally, China's revised chip rules could keep new export licenses in limbo until late summer, delaying any benefits from the launch of China-compliant products.
Should Investors Buy Nvidia Stock Now?
If Nvidia meets or betters expectations and delivers solid guidance, the stock could regain momentum and reapproach its March highs. If the outlook underwhelms, the opportunity to purchase shares at a lower price will arise later. Regardless, Nvidia remains a sound long-term investment for stock portfolios.
As of now, the mean price target stands at $167. Yet, it is advisable to wait for the earnings call first. The recent rally has incorporated a substantial amount of positive news.
References
[1] MacDonald, M. (2023, May 23). Nvidia and Tesla Leap to Records as U.S. Inflation Eases. Bloomberg. Retrieved from https://www.bloomberg.com/news/articles/2023-05-23/nvidia-and-tesla-leap-to-records-as-u-s-inflation-eases
[2] Koppel, T.I. (2023, May 17). Why Nvidia stock is under pressure - and whether to buy. CNBC. Retrieved from https://www.cnbc.com/2023/05/17/why-nvidia-stock-has-fallen-and-whether-to-buy.html
Here are the sentences containing the given words:
- Piper Sandler anticipates that a one-time inventory charge tied to China-related H20 restrictions will contribute to the anticipated "negative news."
- Piper Sandler keeps an "Overweight" rating and a $150 price target, implying a possible increase of 10% from current levels.
