Market on edge: Nvidia stock outlook: AI demand and new products fuel growth as key earnings report approaches

Market on edge: Nvidia stock outlook: AI demand and new products fuel growth as key earnings report approaches

10 minutes to read
Koen Hoorelbeke

Investment and Options Strategist

Market on edge: Nvidia stock outlook: AI demand and new products fuel growth as key earnings report approaches


Introduction

NVIDIA (NASDAQ: NVDA) has been one of 2024’s standout stocks, with a 193% year-to-date gain driven by its leadership in AI and data center hardware. Trading near a record high of $145.26, the stock reflects investor enthusiasm for NVIDIA’s position in AI. However, with high expectations already priced in, the upcoming earnings report on November 20 will be crucial for maintaining this momentum.


Valuation: strong fundamentals at a premium

Nvidia’s profitability supports its premium valuation. With a gross margin of 72.72% and operating margin of 54.12%, the company demonstrates efficient operations in high-demand markets. Still, its trailing p/e of 68.20 and forward p/e of 38.8x signal elevated growth expectations, making the stock vulnerable to any disappointment in earnings or guidance. Wall Street remains mostly bullish, with an average price target of $153.63. However, with the stock price already close to this target, some analysts see limited short-term upside without strong Q3 results.


Analyst sentiment: Blackwell launch drives growth optimism

Analysts continue to view Nvidia favorably, especially with the upcoming Blackwell chip launch. Piper Sandler recently increased its price target to $175, citing Nvidia’s potential to capture a large share of the $70 billion ai accelerator market by 2025. UBS, raising its target to $185, expects Q3 revenue in the $34.5 billion to $35 billion range, above the $32.96 billion consensus. They also expect Q4 revenue guidance around $37 billion, bolstered by sovereign ai investments, which could add $10 billion in 2024.


Q3 earnings preview: high expectations for growth

For Q3, Nvidia is projected to report adjusted EPS of $0.70 and revenue of $32.96 billion (FactSet consensus). UBS’s higher forecast of $34.5 billion to $35 billion reflects strong confidence in Nvidia’s ability to outperform, especially in data center sales. Analysts like Jefferies expect Nvidia-powered servers to account for 66% of data center demand by 2025-26, underscoring Nvidia’s growing dominance in ai infrastructure.


Risks: valuation, supply constraints, and competition

Despite a positive outlook, Nvidia’s high valuation presents risks. A forward p/e of 38.8x leaves little room for error, making the stock sensitive to any signs of slowing demand. Morgan Stanley analyst Joe Moore has flagged limited chip supply as a short-term risk, which could constrain Nvidia’s growth temporarily. Competition is also heating up. Amazon’s Trainium 2 chips are expected to launch soon, with AMD and Broadcom stepping up their presence in ai hardware. This increased competition could impact Nvidia’s market share and pricing power over time.


Conclusion

Nvidia’s November 20 earnings report is pivotal for justifying its premium valuation. Analysts remain optimistic, with strong demand for ai chips and the Blackwell launch driving growth expectations. However, high valuation, supply constraints, and increasing competition introduce potential risks. For growth-oriented investors, Nvidia remains a compelling ai play, but maintaining momentum will require continued innovation and effective supply management.

Quarterly Outlook

01 /

  • 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 ...
  • 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...
  • 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 Bank 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. This content is not intended to and does not change or expand on the execution-only service. 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 Bank 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 Bank 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 Bank 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 Bank 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 Bank 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/legal/disclaimer/saxo-disclaimer)


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.