Nvidia results are AI market's biggest test amid competitive worries

Core Viewpoint - Nvidia's upcoming quarterly earnings report is critical for assessing the sustainability of its profits amid increasing competition and potential risks to its market dominance in the AI chip sector [1][5]. Group 1: Earnings Expectations - Analysts expect Nvidia's profit for the quarter ending in January to surge over 62%, a slowdown from 65.3% growth in the previous quarter [5]. - Revenue is projected to jump more than 68% to $66.16 billion, with first-quarter revenue forecasted to grow another 64.4% to $72.46 billion [6]. - Nvidia has surpassed sales expectations for the past 13 quarters, although the growth delta has been shrinking [6]. Group 2: Competitive Landscape - Nvidia faces competition from companies like Advanced Micro Devices (AMD) and Google, which are developing their own AI chips [3][4]. - Google has entered into a deal with Anthropic to provide its in-house chips, and is reportedly in talks to supply Meta, a significant Nvidia customer [3]. - To maintain its market position, Nvidia has licensed chip technology from Groq in a deal reportedly worth $20 billion [4]. Group 3: Market Dynamics - Concerns are rising about the sustainability of AI spending, with Nvidia potentially reducing its commitment to OpenAI from $100 billion to $30 billion [5]. - Analysts predict Nvidia will forecast revenue for the April quarter at least 3% above estimates, with some expecting it to exceed estimates by over 13% [7]. - Demand for Nvidia's chips, which are essential for processing large AI workloads, is expected to remain strong, supported by Big Tech's capital spending [8]. Group 4: Supply Chain and Production - Supply chain bottlenecks may limit Nvidia's growth, particularly regarding chip shipments as it competes for capacity with TSMC's 3-nanometer assembly lines [9]. - Nvidia's executives hinted at ongoing discussions for data center orders for the next year, suggesting an update to its $500 billion order backlog figure [9]. - The potential return of Nvidia's AI chip sales to China could positively impact sales, as the company seeks to finalize licensing for its H200 AI chip [10]. Group 5: Financial Metrics - Nvidia is expected to record an adjusted gross margin of 75% in the fourth quarter, an increase of over one percentage point from the previous year [11]. - Analysts believe Nvidia's pricing power and secured high-bandwidth memory allocations will mitigate the impact of rising memory prices [12].