Reports Q1 2022 results on Wednesday, May 26, after the close
Revenue Expectation: $ 5.39 Billion
EPS expectation: $ 3.28
The strong recovery of NVIDIA (NASDAQ 🙂 stocks after the March dip suggests that one of the largest chip makers in the US is successfully weathering the supply constraints that are stifling growth in the overall industry.
If so. the company will have good numbers to share with investors when it reports its latest earnings on Wednesday.
The shortage of chips across the industry has caused prices to rise for some products, while for others it has caused delays in order fulfillment. Car manufacturers are the most affected as the acute supply shortage of chips they use in their vehicles has forced some to shut down their factories.
Behind this sudden shift – from a robust growth scenario to supply constraints – lies the pandemic. stimulated demand for everything, including cell phones, laptops, cloud computing and game consoles.
California-based NVIDIA is a provider of the key components required for all of the major, fast-growing technologies in the industry, including cloud computing, artificial intelligence, robotic automation, mobile computing, and the Internet of Things.
NVIDIA is outsourcing production to Taiwan Semiconductor Manufacturing (NYSE 🙂 and Samsung Electronics (OTC :), which are struggling to fulfill orders. NVDA & # 39; s Chief Executive Officer, Jensen Huang, told investors in February that it has enough supply to grow year-round, and that some segments, such as data centers, will not suffer from chip shortages.
Data Center Slowdown
In addition to supply constraints, investors will also focus on demand trends in the second half of 2021 as the US aims for a full reopening of the economy this summer . If that happens, it could normalize demand for chips used in gaming and data centers after the pandemic boom.
Cloud providers, such as Google (NASDAQ 🙂 and Amazon (NASDAQ :), use NVIDIA graphics chips to power some of their most used services on the Internet. That business is cyclical and could enter a slow period after robust activity in the past year.
Intel (NASDAQ :), the largest chip maker, said last month that its Data Center Group generated sales in the first quarter that were down 20. % from a year earlier and missed Wall Street estimates.
Still, NVIDIA remains a strong chip name for a long-term wallet. The company has the right product mix, which will enable it to be capable for years to come.
The chipmaker continues to see a surge in orders for PC gaming equipment from consumers staying at home because of the pandemic and looking for entertainment. NVIDIA graphics chips are also important components in machines that execute the code needed to create Bitcoins and other cryptocurrencies. The price of has been very volatile in recent months.
Analysts at Oppenheimer reiterated their outperformrating on NVDA ahead of earnings, saying they see "upward from consensus." That note said:
“We see a broad benefit (versus the original $ 5.3 billion outlook) led by gaming. Crypto alone contributes $ 100 million of positive contribution. We see upward constraints again due to supply shortages. Restrictions are likely to remain until the end of the year, although a gradual improvement in supply supports continued Q / Q growth. "
Bottom Line
NVIDIA stock may come under pressure if the company sees declining demand for its data center products amid supply constraints. But any post-earnings dip should be used as an opportunity to build a long position in this stock, which has proven to be a solid choice given its strong growth potential.
