Nvidia’s data-center sales likely to eclipse gaming — that might not be a good thing

Rate this post

Sales of Nvidia Corp. data centers are expected. they surpass their game sales in the first quarter fiscal results, as demand for server farms remains high and gaming interest has declined due to rabies levels before the COVID-19 pandemic.

Nvidia NVDA,
+ 3.18%
is scheduled to release financial results after Wednesday’s closing bell. Analysts polled by FactSet expect Nvidia’s data center sales to reach $ 3.6 billion, up 75% from a quarter of last year, which is expected to be only the second time in the company history that data center sales outperform gaming sales.

Analysts expect game sales of $ 3.46 billion. Last quarter, Colvid Kress, Nvidia’s chief financial officer, forecast accelerated data center growth in the first quarter, after a fourth quarter in which data center sales rose 71% year-on-year to a record high. of $ 3.65 billion.

Reads: Why semiconductor stocks are “almost non-reversible” despite record gains amid global shortages

So far, the earnings season has shown strong gains for server chips. Intel Corp. INTC,
doubled its year-over-year outlook as data center revenue improved 22 percent to $ 6 billion, and Advanced Micro Devices Inc. AMD,
+ 0.04%
it posted its first quarter of more than $ 5 billion and guided its first quarter of more than $ 6 billion.

The data center accounts for a “low 20 percent” share of AMD’s integrated and semi-custom enterprise chip unit, which includes data center and game console revenue. It rose 88 percent to $ 2.5 billion a year ago. Sales will be more transparent as the company finally begins to distribute data center sales to its own segment.

As AMD and Nvidia struggle to share server CPUs, Nvidia dominates its role as a data center accelerator. Jefferies analyst Mark Lipacis, who has a $ 370 purchase rating and a target price on Nvidia, says the chip maker “dominates instances of the dedicated accelerator with about 80% share” of the data center sales.

Reads: The end of the wonders of a chip: why the ratings of Nvidia, Intel and AMD have experienced a massive upheaval

After results from Intel, AMD and others, Evercore analyst CJ Muse, who has an overweight rating and a $ 300 price target on Nvidia, said the data center products are facing ” robust demand trends are expected to drive very strong growth over the next few quarters. ”Demand, however, has hardly seemed a problem, but rather supply difficulties and growing barriers .

Investors will look for any issues similar to Cisco Systems Inc. CSCO,
who reported his earnings last week. Cisco, which has a late April quarter as Nvidia, noted that it was sidelined after Chinese authorities shut down Shanghai from March 27 and threw a wrench at Cisco’s ability to get components. As a result, Cisco issued a bad outlook and stocks saw their worst day in more than a decade.

What to expect

Earnings: Of the 39 analysts surveyed by FactSet, Nvidia is expected to post an average adjusted earnings of $ 1.30 per share, more than the 92 cents per share reported a year ago and $ 1.19 per share expected at the beginning of the quarter. All figures are adjusted for last year’s 4 per 1 stock split.

Income: Wall Street expects $ 8.12 billion in revenue from Nvidia, according to 36 analysts consulted by FactSet. That’s more than the $ 5.65 billion that Nvidia reported in the quarter of a year ago and the $ 7.82 billion expected at the beginning of the quarter. In its latest earnings report, Nvidia forecast between $ 7.940 billion and $ 8.6 billion.

Stock movement: During the first quarter of Nvidia, or the end of April, shares fell 25%, while the PHLX Semiconductor SOX index,
+ 0.35%
fell 17% during this period. Meanwhile, the S&P 500 SPX Index
+ 0.11%
down 8.5% while the Nasdaq Composite Index COMP,
+ 0.51%
dropped 13%. On November 29, Nvidia shares closed at an all-time high of $ 333.76 and have fallen 50% since then.

Nvidia has consistently surpassed analyst revenue estimates for the past five years and has surpassed Street revenue estimates for 12 consecutive quarters. Shares fell 7.6% the day after last quarter’s report, despite a slump in earnings. In general, the movement of the actions has been mixed in the middle of the rhythm chain.

What analysts say

Oppenheimer analyst Rick Schafer, who has a top performance and a $ 300 price target, said Nvidia is likely to consolidate its leadership in the data center as its new H100 chip increases in the third quarter.

“Demand continues to outpace supply, although restrictions are expected to decrease in 2H,” Shafer said. “Ada Lovelace’s next performance gaming GPU is expected in the third quarter. Our long-term thesis remains intact as NVDA’s major gaming and AI accelerator franchises remain positioned for disproportionate structural growth “.

Reads: Chips may run out in 2022 due to shortage, but investors are worried about the end of the party

Wedbush analyst Matt Bryson, who has a neutral rating and a target price of $ 190, said any downside for Nvidia “is necessarily tied primarily to gaming revenue.”

“For gaming, falling secondary market prices and improving retail availability are some of the signs that GPU demand is finally slowing,” Bryson said. “While this result makes sense, especially with the slow pace of Ethereum writing, the specific impact for Nvidia is difficult to quantify given many variables.”

Reads: Nvidia is looking to lead the gold rush in the metavers with new AI tools

Susquehanna Financial analyst Christopher Rolland, who has a positive rating and a target price of $ 320, agreed in a note on Wednesday that “any significant increases and increases may be limited by anti-gaming winds.”

“For gaming, we note that retail premiums above the MSRP of Nvidia cards have fallen sharply from a high of + 130% in mid-2021 to + 78% in January and only 23% today,” he said. Rolland. “Coinciding with these falling prices, we have also witnessed a major replenishment, with all major card families now available to retailers.”

Of the 45 analysts covering Nvidia, 37 have buy ratings, seven have hold ratings and one has a sell rating, with the stock price 46% below the average target price of $ 306.68, according to data from FactSet.

Source link

Leave a Comment