Recent data showing Microsoft reducing its data center footprint has hurt Nvidia (NYSE:NVDA) ahead of Wednesday’s earnings.
NVDA – Daily Chart
The NVDA price has moved back to the $130 level after another test of the $140 resistance.
Julian Emanuel, managing director at Evercor, told CNBC that a potential growth scare was happening ahead of Nvidia earnings.
The latest earnings report comes on Wednesday from the chip titan and Erik Gordon, professor at the University of Michigan’s business school said Nvidia is vital to the tech market due to its “sheer size and its influence on the stock market”.
“During the dot-com era, there were something like 2,888 startups that went public. So far, there have been zero startups that have gone public for generative AI,” said Peter Cohan, professor of management practice at Babson College.
Data this week from TD Cowen showed that Microsoft had cancelled some leases for data centers and that has been a huge driver for Nvidia. The arrival of China’s DeepSeek tool rattled the artificial intelligence space as investors worry that tech companies will have to scale back their AI spending. That would directly hurt Nvidia’s revenue.
Wall Street analysts are still positive on the outlook for the chipmaker. UBS analysts, who maintained a $185 price target on the stock, said “investor expectations… crept up a bit recently,” and added supply chain improvements could mean higher sales of Nvidia’s Blackwell platform. UBS nearly doubled its estimate for Blackwell’s effect on fourth-quarter revenue to $9 billion, up from $5 billion.
Nvidia is expected to post record quarterly revenue of $38.3 billion, up 73% year-over-year, according to estimates from Visible Alpha. Net income is expected to jump to $21.1 billion, up from $12.84 billion a year earlier.
Analysts will also be watching the earnings release carefully to see if Nvidia CEO Jensen Huang and other management make comments on DeepSeek and its potential impact on the AI space.
The arrival of a budget rival to ChatGPT risks a big drop in AI spending on high powered GPU chips. This will be an important earnings release where Huang’s firm will have to prove that it is business as usual at the chipmaker.
DeepSeek was mentioned in at least nine earnings calls last week, according to AlphaSense, highlighting that analysts are concerned about the new technology.
