Nvidia Earnings Surprise Amidst Pressure

Nvidia's second-quarter earnings report, released recently, recorded better than anticipated results, boasting a data center revenue boost of approximately $1.5 billion. However, Wall Street's lukewarm reaction raises eyebrows about the overall health of the AI boom. According to equity analyst Angelo Zeno from CFRA Research, this situation is not indicative of a fundamental shift for Nvidia as a company but rather reflects a classic 'sell the news' scenario. Despite robust earnings, sequential growth is projected to slow down from 15% to between 8% and 10%, sparking debate over Nvidia’s overall narrative. A major contributor to this slowdown includes the delayed Blackwell launch, which could affect upcoming revenue streams, although Zeno remains optimistic about future growth tied to advancements in the h100 and h200 technology. Major tech companies are expected to continue their aggressive investments in AI, albeit at a decreasing pace. The forecast for 2024 indicates a potential deceleration to 15-20% growth. Zeno stressed that investors need to assess Nvidia's current revenue composition, which is now heavily reliant on hyperscalers rather than consumer markets, implying resilience in revenue channels. Concerns have emerged surrounding potential revenue concentration risks due to dependence on a handful of large clients, yet Zeno argues it may not be detrimental given the financial health of hyperscalers. As Nvidia ventures into its upcoming earnings report, it faces the challenge of sustaining its momentum against a backdrop of fluctuating market expectations.