Nvidia rides AI hype to new all-time high as Q4 earnings season nears

Nvidia rides AI hype to new all-time high as Q4 earnings season nears

Equities 5 minutes to read
Peter Garnry

Chief Investment Strategist

Summary:  Nvidia's share price surged 6.5% to a new record high driven by the announcement of new AI chips for personal computers. The move highlights the growing investment opportunities in AI and the potential for the technology to expand into consumer markets. Meanwhile, the four major US banks will report Q4 earnings on Friday, with analysts expecting revenue growth to normalize and credit provisions to rise.


AI hype catapults Nvidia to new all-time high

Nvidia shares jumped 6.5% yesterday to a new all-time high keeping the AI hype alive and increasing bets that 2024 will be another year of massive technology investments into AI. The positive sentiment yesterday was due to Nvidia announcing a new AI chips for personal computers that will allow AI capabilities to potentially expand closer to consumer. One of the key arguments for putting AI chips into personal computers compared to the current model with massive AI chips sitting in gigantic datacentres is that it increases security running AI applications more decentralized. The share price increase yesterday constituted an increase in market value of $79bn. This corresponds to adding the market value of Equinix (the world’s largest operator of datacentres) or Schlumberger (one of the world's largest oil and gas services providers).

Nvidia remains the hottest trade in the US technology sector seen as the most direct and potent exposures to the initial investment boom in AI as Nvidia is leading the industry of AI chips. The high expectations are clearly reflected in the company’s equity valuation which measured on 12-month EV/EBITDA is 23x which is significantly above the MSCI World Index at 12x. The sell-side consensus price target is currently $648 around 24% above yesterday’s closing price. Despite a year of galloping expectations for Nvidia the chipmaker’s astounding results exceeding expectations have created a powerful feedback loop. This is also the biggest danger this year as Nvidia is estimated to increase revenue by a whopping 57% in FY25 (ending 31 January 2025) to reach $92.6bn. One of the key outstanding questions about Nvidia revenue is how much of revenue to China was frontloaded due to upcoming sanctions and thus could pose a hangover risk over the coming year.

Nvidia share price | Source: Saxo

The Q4 earnings are a key test of technology earnings

On Friday the market enters its first big earnings release day with the four major US banks JPMorgan Chase, Wells Fargo, Bank of America, and Citigroup reporting Q4 earnings. Analysts expect net revenue growth to begin normalizing as interest rates have stopped rising and also expect credit provisions to rise reflecting a deterioration in credit quality and future losses on loans. Higher credit provisions were the big surprise factor in Q3 for US banks as they across the board reported lower than estimated credit provisions as the resilient US economy shielded the corporate and household sector. JPMorgan Chase is the largest US bank and is projected to increase net revenue by 16% y/y in Q4 and deliver EPS of $3.57 down 1% y/y. The stock price is up  27.6% since the lows in October 2023.

As the chart below shows the operating income (EBITDA) rose 13.2% for Nasdaq 100 in 2023 up until Q3 outpacing the S&P 500 and STOXX 600 due to aggressive cost cutting and accelerating revenue growth. However, technology stocks much more expanding equity valuations as investors believe the growth and good times will continue into 2024. This is exactly why technology earnings are more important than ever to this market. One because they set sentiment but also because US equity market index concentration is extremely high.

JPMorgan Chase share price | Source: Saxo

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.