After the market close on November 20th Eastern Time, the AI chip giant - $NVIDIA (NVDA.US)$ is about to announce its financial results for the third quarter of fiscal 2025.

Since OpenAI launched ChatGPT in November 2022, nvidia's stock price has been soaring. Since then, nvidia's stock price has risen by over 800%, with a market cap exceeding 3.5 trillion USD, successfully surpassing apple to become the world’s number one, while also joining the Nasdaq.

Looking ahead to the third-quarter results, the market generally expects nvidia to achieve revenue of 33.028 billion USD, a year-on-year increase of 82.27%; eps is expected to be 0.7 USD, a year-on-year increase of 88.11%. This also means the company will achieve record revenue and profit for the sixth consecutive quarter.

According to Bloomberg consensus estimates, as nvidia's most critical business - datacenter is expected to achieve revenue of 29.083 billion USD, a year-on-year increase of 100.38%. This indicates that the share of this business in the company's revenue is expected to continue to expand to 88.06%, compared to 87.5% in the last quarter.

In addition, although the datacenter business has received significant attention, the gaming business remains an important source of income for nvidia. According to Bloomberg consensus, the gaming business is expected to achieve 3.072 billion dollars in Q3, a year-on-year increase of 7.55%.

In addition to the Q3 performance, these two key events may become the "deciding factors" for stock prices on earnings report day.

• Blackwell architecture chip becomes a catalyst.

Recently, nvidia announced the performance of the Blackwell GPU in AI training workloads, which is 2.2 times faster than the previous generation Hopper chip when training large models. This has made many analysts bullish on the prospects of this chip.

Analysts generally believe that the development of ai applications is still in the early stage, and the Blackwell cycle will continue to drive nvidia's performance upward. Morgan Stanley expects that the new Blackwell product line is anticipated to boost the company's revenue in the January quarter, with sales expected to be between 5 billion and 6 billion dollars. Morgan Stanley also predicts that nvidia's gross margin in the third fiscal quarter will improve.

Although the expected increase in Blackwell's initial capacity starting from January will bring lower profit margins, the chip manufacturer had previously expected the gross margin to decrease from 75.7% in the second quarter to 75.0% in the third quarter; this forecast is too conservative.

The costs associated with Blackwell's initial launch will not be repeated, and resistance in the third quarter is expected to be minimal. Nevertheless, the increase in production volume for Blackwell and related products brings about revenue instability and uncertainty in profit margins. It is expected that the company still needs to be cautious of further gross margin resistance.

In addition, the capital expenditure plans of technology giants like microsoft, amazon, and Meta are "very robust". Wall Street's well-known investment firm Melius predicts that these companies' datacenter capital expenditures will grow by 24% by 2025, reaching 282 billion dollars, supporting Blackwell sales.

• What is the progress of the new share buyback plan of 50 billion dollars?

In August this year, the board of directors of nvidia approved a new share buyback plan of 50 billion dollars.

The current price-to-earnings (P/E) and price-to-free cash flow (P/FCF) ratios of nvidia stocks are lower than the average levels of the past two years. If Blackwell can indeed drive the company's stock price to further explode, the management should start to expand the scale of share buybacks in Q3. Therefore, the timing of the company's buybacks becomes particularly important.

If nvidia does not buy back stocks at a more reasonable valuation before a significant rise in stock prices driven by Blackwell, or if Blackwell's sales guidance is below expectations, it may become a negative signal.

How does Wall Street look at this?

Given the optimistic expectations for the Blackwell super cycle, analysts on Wall Street such as morgan stanley and ubs group have raised the target price for nvidia ahead of performance release.

Melius Research, a well-known Wall Street investment institution, stated that investors should continue to hold nvidia, as the company's next-generation Blackwell gpu will be a watershed moment, and has raised the target price to 185 dollars. The firm believes that

nvidia is approaching apple's 'iPhone moment', and selling nvidia now is like selling apple stocks right after the first generation iPhone was released.

Currently, nvidia's Hopper and the soon-to-be-released Blackwell gpu represent the foundation of advancements in ai, powering everything from ai chatbots like ChatGPT to autonomous autos.

Large clouds, sovereign nations, and large enterprises are still more likely to invest more funds in this "rare opportunity." The institution is not only excited about Blackwell's performance in 2025 and Rubin's in 2026 but is also becoming increasingly optimistic that nvidia's gross margin can steadily rebound to around 75% by the middle of fiscal year 2026.

Piper Sandler analyst Harsh Kumar stated that given nvidia's dominance in the ai accelerator field and the upcoming Blackwell architecture, nvidia is listed as a preferred investment. The total market size of ai accelerators in 2025 will continue to rise, and nvidia "occupies a favorable position," likely to capture the largest market share. The analyst raised nvidia's target price from $140 to $175.

HSBC analysts are even more optimistic, directly raising nvidia's target price from $145 to $200, making it one of the most bullish mainstream institutions on nvidia's future market.

However, recently major investment institutions have also released their third-quarter form 13f reports, revealing some large investment institutions' trade activities. Among them, Jinglin Asset completely liquidated 12 stocks including nvidia, Tesla, amazon, and microsoft in Q3; Bridgewater and Hillhouse also reduced their shareholding in nvidia. Therefore, investors still need to pay close attention.

How has the stock price performed on past earnings days?

According to Market Chameleon, backtesting performance days over the past 12 quarters shows that nvidia has a high probability of rising on earnings release day, around 67%, with an average price change of ±8.3%, a maximum increase of +24.4%, and a maximum decrease of -7.6%.

Some investors seem to be preparing for significant fluctuations. According to the data, currently, nvidia's implied volatility is ±9.5%, indicating that the options market is betting on a single-day price move of 9.5% after earnings; in comparison, nvidia's average price change in the four quarters following earnings was ±8.6%, showing that the current options value of the stock is overvalued.

From the skewness of the options volatility, the market sentiment towards Nvidia is slightly bullish.

Nvidia plans to hold a live performance broadcast on November 21, 2024 (Thursday) at 06:00 Beijing time, everyone is welcome to make an appointment to watch~

Editor/Somer