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Investing.com - As Wednesday approaches, chip innovator NVIDIA Corporation (NASDAQ:NVDA) finds itself in the spotlight as investors eagerly anticipate a revenue forecast that surpasses expectations.
The rise of generative artificial intelligence applications like ChatGPT has been a boon for Nvidia, with its graphics processors being the driving force behind these cutting-edge technologies. This year alone, the value of Nvidia shares has tripled, resulting in an impressive addition of over $700 billion to their market valuation and crowning them as the inaugural trillion-dollar chip firm.
This incredible surge in share values leaves little margin for error when it comes to earnings announcements. Analysts caution that anything short of an optimistic forecast could lead to significant fluctuations in its stock prices.
The outcome from this week's results could set the tone for broader market movements, given how instrumental AI-driven rallies in companies like Nvidia have been for S&P 500’s gains this year.
While Citigroup Inc (NYSE:C) analysts project a modest revenue forecast of around $12 billion last week, bullish insiders are expecting figures closer to $14 billion. This optimism is reflected by at least ten brokerages who upped their price targets on Nvidia stocks recently, pushing median predictions to a robust $500 – a promising increase compared to previous closing prices.
There was indeed significant growth after second-quarter forecasts predicted over 50% growth back in May. Although once soaring high above 80 times forward PE ratio has since tempered down due largely to raised earnings expectations; currently trading almost double the of Advanced Micro Devices Inc (NASDAQ:AMD) at nearly forty times projected consensus earnings over next year.
Investors' eyes will be firmly fixed on sales performance within Nividia’s data center unit which houses their coveted H100 chip used extensively across AI industries - looking out particularly whether current valuations can be justified or not.
However, supply-demand issues persist; only half of the demand is met and its prized H100 chips command twice their original price tag now stands at roughly $40k per unit - a trend expected to continue into forthcoming quarters according to industry experts.
Concerns about sustainable growth do exist though as much of the current demand surge originates from China where fears about potential US export restrictions have led companies to hoard chips.
Moreover, such supply-demand imbalance might drive customers towards competitors like AMD who are poised to challenge Nivida's supremacy with their new M1300X chip aimed squarely at tackling demanding AI workloads.
