Although the bulk of earnings season is now in the rearview mirror, arguably the most consequential report is yet to come. After the closing bell on Aug. 26, the face of the artificial intelligence (AI) revolution, Nvidia (NASDAQ: NVDA), will lift the hood on its latest quarterly operating results. As has been customary for much of the last four years, Nvidia is expected to blow past Wall Street's consensus sales and profit forecasts.
But if history rhymes, once again, it won't be enough to drive the company's lofty valuation higher. This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia.
For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » Based on current estimates, Nvidia is expected to deliver nearly $91.9 billion in fiscal second-quarter sales (up 96% from the year-ago quarter) and earnings per share (EPS) of $2.08. With an average EPS beat of $0.065 over the last four quarters, Nvidia is hurdling profit expectations by roughly $1.5 billion per quarter.
There's no secret to Nvidia's formula for success. The company's graphics processing units (GPUs) are superior, and Wall Street's most influential businesses have shown a willingness to pay a premium for the best products in the AI arena. With no competitors particularly close to matching or surpassing the compute capabilities of Nvidia's core GPU lineup, it's been able to charge a hearty premium.
Additionally, Nvidia has been buoyed by a persistent GPU supply shortage. When demand for a good or service outstrips its supply, prices go up until demand tapers off. With no immediate end in sight to this GPU supply demand mismatch, Nvidia has consistently raked in a gross margin of around 75%.
Unfortunately for investors, Nvidia's headline figures tell only part of the story. Although history can't guarantee what's to come on Wall Street, past events have an uncanny ability to predict the future more often than not. In Nvidia's case, history predicts another losing streak following its upcoming earnings release.
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