Introduction
Nvidia (NVDA) is scheduled to announce its financial results this Wednesday, and attention is focused on the impact this will have on the overall stock market. In particular, the company made a major guidance update in its financial results announcement in May 2023, which caused its stock price to soar, but the situation is different this time.
Main article
Past financial results and changes in growth rate
NVDA had recorded negative growth for four consecutive fiscal years until the April 2023 fiscal year, but its stock price soared because its guidance for the July 2023 fiscal year was very high. Until the April 2024 fiscal year, year-on-year comparisons were easy and the growth rate was very high, but this fiscal year (July 2024) will be difficult to make year-on-year comparisons.
Slowing growth rate
The expected growth rate for this fiscal year is 139% for EPS and 113% for sales, and is expected to slow to 77% and 75%, respectively, in the next fiscal year (October 2024). The impact of AI began to become apparent in the July 2023 financial results, and since exactly one year has passed since this quarter, it will be difficult to compare the results with the same period last year.
Market reaction
NVDA's growth rate is mathematically impossible to continue forever, and a certain degree of slowdown in growth rate is already factored in. However, the question is how much slowdown is acceptable and how much slowdown it will take for shareholders to start selling. In fact, hedge fund investors such as Druckenmiller have already sold off their NVDA shares.
Conclusion
In this earnings announcement, the market's reaction to the earnings is more important than the earnings themselves. If NVDA reports better than expected earnings but the stock price falls, it will mean that NVDA, the pioneer of the AI boom, has failed, and the entire US stock market may fall. If the guidance is $32.5 billion or $33 billion, the stock price is likely to rise, but if it is less than $32 billion, the stock price may fall significantly.
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