The stock's rally in 2023 reflects optimism over artificial intelligence (AI), a sector in which Nvidia is a key player. Last quarter, Nvidia gave a stronger-than-expected forecast, reinforcing its position as a primary beneficiary of AI spending. The upcoming report will provide new details on whether demand is strong enough to justify the stock's surge. Investors are looking for continued growth despite supply constraints for graphics processing units and want to see a timeline for supply-demand balance regarding GPUs and AI demand.
Key takeaways:
- Nvidia shares fell by 2.8% on Tuesday, despite hitting an all-time intraday high of $481.87 earlier in the day. The stock has surged 212% this year, making it the biggest gainer among the S&P 500 Index.
- The options market is bracing for a move of 9.8% following Nvidia's highly anticipated earnings report due on Wednesday. Nvidia's stock movement will have broader implications as it accounts for nearly 3.1% of the S&P 500.
- Investor optimism over Nvidia is largely due to its key role in artificial intelligence (AI). The company's stock rally reflects expectations of massive demand for the chips used to process AI services.
- Despite supply constraints for graphics processing units, investors are looking for continued outsized growth and a timeline for supply-demand balance regarding GPUs and AI demand. Nvidia's stock currently trades at 44 times estimated earnings, above its 10-year average of 32.