The analysts who cover chipmaker Nvidia’s stock NVDA are praising the company’s blockbuster quarterly results. Before the May 26 release of the quarterly numbers, analysts expected some upside to consensus estimates as a result of the company’s AI leverage. But by that time, the stock had already doubled this year in anticipation of the impact of AI. Nvidia significantly raised its Q2 revenue guidance based on the strength of demand for generative AI and large language models, which could have a transformative effect on efficiency. It’s unclear, however, how sustainable this growth trajectory will be and whether Nvidia can maintain its competitive edge as Microsoft MSFT and Alphabet GOOGL also seek to dominate the AI market.
The combined Q1 earnings for the ‘Big 5 Tech Players’ (Apple AAPL, Amazon AMZN, Meta META, Microsoft, and Alphabet) were essentially flat, with a 0.4% drop, despite a 4.3% rise in revenue. Growth is expected to pick up from the current period, with earnings projected to be up by 8.9% and revenues 4.9% higher.
The Q1 earnings season yielded good enough, but not great, results. It seems unlikely that corporate earnings will fall off a cliff, as some market bears had predicted. As almost all the quarterly reports have now been released, corporate profitability has demonstrated considerable resilience. The upcoming reports from the final batch of 100 firms will help complete the overall earnings picture. Salesforce.com, Macy’s, Broadcom, Lululemon, and Dollar General are among those set to report their results this week.
Zacks Investment Research has published a chart to illustrate earnings and revenue growth expectations for the S&P 500 index in 2023 Q1 and the next three quarters.
Image Source: Zacks Investment Research
The future of AI remains very much up in the air. Despite its rapid growth and great potential, it faces a number of challenges and uncertainties that could limit its impact and lead to an ‘AI bubble,’ as some have suggested. However, for now, there is no doubt that AI has captured investors’ imaginations and show no signs of slowing down.
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