Nvidia's surge far from over as AI train is back on track: HSBC

Investing.com - Nvidia (NASDAQ:NVDA) is due to report its latest quarterly results on Nov. 20, with investors on the lookout for any guidance from the chipmaking titan about demand for its artificial intelligence-enhancing hardware heading into 2025.

Some analysts have come to view the release of the figures as equivalent in importance for markets as the US jobs report or consumer price data. Nvidia (NASDAQ:NVDA ), which manufactures semiconductors that are considered to be crucial components in training and deploying AI-powered applications, has become a focal point of runaway enthusiasm around the nascent technology.

Shares in the company have surged by more than 200% so far this year, a sharp rally that has also fueled its outsized impact on US stock markets. Much of the year-to-date gains in the benchmark S&P 500 has been driven by the spike in Nvidia.

Big Tech players like Google-owner Alphabet (NASDAQ:GOOGL ) and Amazon (NASDAQ:AMZN ) are among Nvidia's largest customers, spending heavily on its products to run the data centers powering their all-important AI innovations. As a result, Nvidia's earnings can serve as a gauge of the state of the AI boom, particularly at a time when investors are beginning to call for more evidence that the steep AI expenditures are leading to tangible returns.

In a note to clients, analysts at UBS led by Timothy Arcuri said that while these worries remain a major source of debate, recent growth at Google's search and cloud divisions as well as evidence of cost savings from Amazon's use of AI are both "encouraging signs."

CEO Jensen Huang said in August that demand for Nvidia's current-generation Hopper chips was "strong," although the company's guidance for third-quarter revenues of $32.5 billion -- plus or minus 2% -- was only slightly above Wall Street projections. Analysts noted that, due to Nvidia's recent track record of far outpacing expectations, even a modest beat was enough to disappoint investors.

Meanwhile, Chief Financial Officer Colette Kress laid out a timeline for the production of Nvidia's next-generation Blackwell chips. Kress said output of the processor -- which was delayed earlier this year -- is now tipped to ramp in the fourth quarter and continue into Nvidia's 2026 fiscal period.

"In the fourth quarter, we expect to ship several billion dollars in Blackwell revenue," Kress said.

Analysts at HSBC led by Frank Lee argued that the roadmap for Blackwell production is "back on track," with the technology set to potentially contribute $5 billion to overall revenues in the fourth quarter of Nvidia's 2025 fiscal year.

This should offset any possible downside in revenues from its H20 chip, they added. Although the H20 is designed specifically to comply with US export rules, the analysts flagged worries around geopolitical uncertainty hanging over China's outlook for shipments of AI graphics processing units.

Still, they said Nvidia's market valuation, which is currently approaching $3.6 trillion, is "set to move further into uncharted territory."

"We have pondered this amazing growth trajectory and not only do we see no signs of a slowdown, we expect further upside in [fiscal 2026] data center momentum, which in our view is still not fully priced in by the market," the analysts said.

Source: Investing.com