Nvidia Aims for AI Finance Dominance as Q2 Earnings Loom

Nvidia is set to report its Q2 earnings tonight, and expectations are high for another monster report. The company's revenues could come in above $92bn, with earnings per share at $2.09. Last quarter, Nvidia guided that Q2 revenue would be $91bn, +/- 2%, but the pace of growth has been rapid, with a year-over-year increase of 85%.

Nvidia is shifting its business model from being primarily a chip maker to an AI financier. This summer, it finalized a deal with OpenAI on the Ohio data center project, providing a $105bn finance package for the world's largest data center. The company has also pledged $100bn to create 10 gigawatts of future data centers through its partnership with OpenAI.

The company is rapidly changing its risk profile as it transitions from a pure chip and GPU maker to a financier for the AI revolution. Investors will be closely scrutinizing Nvidia's net income, which includes unrealized gains in its multiple AI investments. The Non-Marketable Securities section, which includes Nvidia's investments in private companies, will also be watched closely.

Nvidia's forward P/E ratio is 23 times earnings, just above the S&P 500 average of 20x. If investors see Nvidia's investments as jeopardizing future profits, its valuation metrics could deteriorate. However, if these investments pay off, Jensen Huang's prediction that Nvidia could become the first $20 trillion company may come true.

From a technical perspective, the stock price has bounced off its 50-day SMA support at $207 and is slightly higher in the pre-market today. A break above $216 would be bullish, while a break below $195 could signal further losses back towards $190 lows from the end of July.