Nvidia Q2 2024 Earnings
27-08-24
This Wednesday 28th August, NVIDIA will publish its Q2 earnings after market close detailing its latest revenues, earnings per share and forward guidance in what is set to be a defining moment for the AI sector ahead of the anticipated 25bp cut from the Federal Reserve on the 18th of September.
NVIDIA is currently the leading force in the semiconductor and artificial intelligence (AI) sector after developing a highly integrated and loyal following amongst the developer community. In addition to its hardware dominance, NVIDIA has established an effective monopoly with its CUDA software, which is the only parallel computing platform and application programming interface (API) model that enables developers to harness the full power of NVIDIA GPUs for general-purpose computing.
It has become the backbone for a wide range of computational tasks, including deep learning, scientific research, and high-performance computing. The widespread adoption of CUDA has established it as a de facto standard in the AI and machine learning communities, enabling developers to create highly optimised and efficient applications that can leverage NVIDIA’s cutting-edge GPU technology. This ecosystem of software and tools not only enhances the performance of NVIDIA’s hardware but also deepens customer loyalty by creating a strong, integrated development environment that is difficult for competitors to replicate.
The company’s strategic focus on AI and data centres has continued to pay off, with these segments driving a significant portion of the company’s revenue growth. Its advanced GPUs and AI platforms, including the A100 and H100, are integral to the operations of major tech companies, cloud providers, and research institutions. This has fuelled the growth in NVIDIA’s data centre segment, which has profited substantially from the sale of the microchips used for their servers and AI infrastructure.
PREVIOUS Q1 EARNINGS SUMMARY
For Q1 2025, NVIDIA reported an EPS of $6.12, significantly beating the consensus estimate of $5.59, reflecting a 9.48% surprise. Revenue for the quarter came in at $26.04 billion, surpassing the expected $24.65 billion by 5.66%. This robust performance underscores NVIDIA’s ability to capitalise on the growing demand for AI and advanced computing solutions.
Figure 1. NVIDIA 6M share price chart – highlighting performance following prev. Q1 earnings
Investor sentiment towards NVIDIA has been overwhelmingly positive to date. The stock has seen significant gains following its previous earnings announcement – marking a 33% rise since the 22nd of May, reflecting confidence in the company’s long-term growth prospects.
CHALLENGES
Despite its strong performance, NVIDIA does face some challenges, and many leading tech investors will be watching its latest forward guidance very closely. Market tension is brewing over a possibly top-heavy AI sector, which has faced ongoing supply chain constraints that have affected the broader semiconductor industry. The global chip shortage has impacted production capacities, potentially limiting NVIDIA’s ability to meet surging demand.
Competition meanwhile remains fierce, particularly from companies like Advanced Micro Devices (AMD), which are making aggressive moves in the AI and GPU markets, spurred on by tech heavyweights that are desperate to break its market dominance. However, NVIDIA’s strong leadership and continuous innovation in AI has so far allowed it to maintain a competitive edge.
Looking ahead, analysts remain optimistic about NVIDIA’s future, particularly as AI adoption continues to accelerate across industries. However, any weak forward guidance or missed earnings figures may lead to a sell-off across the tech sector, as current priced-in lofty market expectations are shattered.
For its upcoming Q2 earnings, NVIDIA is expected to report earnings of $5.70 per share and revenue for the quarter of $25.59 billion.
If you believe that NVIDIA’s Q2 earnings may fail to live up to lofty market expectations, you may consider buying a protective put option to hedge an existing NVIDIA equity position against a sell-off.
Protective Put
Trade Idea
Protective Put
The following put contract protects $12,500 worth of stock against a more than 8% decline for $475.
NVIDIA Cash Price = $125.04 (as of 27/08/2024 at time of writing)
Total consideration: $475 (excl. fees and commissions)
1 (contract) x $4.75 (contract price) x 100 shares (contract size) = $475 debit
A 20% decrease in the current share price to $100 by 20-Sep-2024 expiry would value the put option at $15.00 for a total consideration of $1500; yielding a 215% return on your initial investment – protecting the value of your underlying equity position.
The $115 put option would break even if the NVIDIA share price decreased to $110 by expiry on 20-Sep-2024
Maximum loss: $475 (excl. fees and commissions)
Defined risk profile, maximum loss of a long option position is equal to the premium paid.
The contents of this article are for general information purposes only. Nothing in this article constitutes advice to any person and any investments and/or investment services referred to therein may not be suitable for all investors. If you’re unsure whether any investment is right for you, you should contact an independent financial adviser. For more information, please see IMPORTANT DERIVATIVE PRODUCT TRADING NOTES.
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