After Nvidia’s earnings, is the AI ​​trend still investors’ friend? (Video)

Trends are trends because they come and go, and the world of investing and markets is certainly no exception.

In 2020, it was work from home. In 2021 there was a Great Discovery. In 2022, it was cryptocurrencies and digital assets, and a bit of ESG. The year 2023 was dedicated to the Magnificent Seven. And this year? Obviously, artificial intelligence led by world leader Nvidia (NVDA).

A quick look at the attention and coverage Nvidia is receiving ahead of its quarterly earnings suggests that That shares 2024. It has also quickly catapulted the company into a rarefied environment where analysts and investors constantly have surreal expectations about how much the company is selling, how much it should sell and how much demand there will be for its AI-focused products. chips.

Its latest earnings report was no exception, with Super Bowl-like media coverage leading up to and following Wednesday’s data.

It’s unclear why: Nvidia is undoubtedly the king of artificial intelligence, with large, high-profile clients like Microsoft (MSFT), Google (GOOG), Amazon (AMZN) and others snapping up its semiconductors and hardware in brutal fashion to boost your capabilities. their proposals based on artificial intelligence.

But when it comes to investing, it all depends largely on potential. Even though Nvidia beat expectations for the quarter and posted better-than-expected guidance, shares fell temporarily. Investors were either taking profits from previous investments in the stock or were disappointed by the fact that the returns – a 94% increase in sales over a three-month period – were no longer what they had been.

NVIDIA previously reported sales growth of 122% in the second quarter, 262% in the first quarter and 265% in the fourth quarter of 2023.

Proponents of artificial intelligence argue that the world is just at the beginning of the transition to the next level of computing, where large language models and algorithms operate faster and deeper than ever before. And Nvidia supporters argue that Nvidia is far superior to its competitors in supplying the necessary chips and hardware.

“We’re in the very, very early stages of a transformative moment in the computing space,” Creative Strategies consumer technology director Ben Bajarin told Yahoo Finance on Thursday after the earnings report.

On the other hand, some analysts are leery of whether Nvidia’s customers, including Meta (META), Microsoft and Google, will be able to recoup the billions they spend on artificial intelligence hardware.

Nvidia’s ability to meet demand for its popular Blackwell chip is also giving some analysts, including Emarketer’s Jacob Bourne, pause.

“Critical issues related to Blackwell’s production growth and customer concentration remain key issues,” Bourne said in the note. “In 2025, there is little room for execution errors.”

There is also political uncertainty given Donald Trump’s threat to impose blanket tariffs on products from around the world, including chips and components made outside the US, especially Taiwan. Trump said companies like TSMC, which currently makes chips for Nvidia and other companies in Taiwan, would be interested in building chip plants or factories in the U.S. to avoid having to pay tariffs.

For the most part, investors and analysts seem more than willing to continue betting on Nvidia well into 2025. The stock is up more than 210% year to date.

However, expectations for the next quarter are already high, with revenue for the quarter ending January 2025 expected to be $38 billion, according to the average estimate of 40 analysts tracked by Yahoo Finance, up from $35.1 billion most . last quarter.

Of course, there is no such thing as insatiable demand, and there will come a time when AI development may overtake AI adoption. Even before that point, investors and Wall Street will likely already be reevaluating and adjusting their expectations for Nvidia’s future sales and earnings.

Check out additional Nvidia analysis from Yahoo Finance

The bigger question is whether AI itself will change computing technology in the long term or is it just another investment trend. Does anyone remember the term “big data”?

Corey Goldman is a senior editorial consultant at Yahoo Finance. Follow Goldman on Twitter/X @mcoreygoldman.

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