Investors’ eyes are fixed on Nvidia Corporation NVDA as it prepares to report second-quarter earnings after the market close on Wednesday.

The market is particularly keen on gauging Nvidia’s performance as it relates to the broader artificial intelligence landscape. With AI emerging as a transformative force across sectors, Nvidia’s earnings might serve as a barometer for the health of the AI industry.

At the end of the first quarter, the chipmaker giant announced that second-quarter revenues would far exceed market expectations, driven by AI-related semiconductor sales.

Nvidia’s journey in 2023 has been marked by astonishing growth, with shares surging by 212% year-to-date, 106% over the last six months and 50% over the last three months.

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What Does The Market Expect From Nvidia?

The consensus among Wall Street analysts calls for earnings per share of $2.08 and revenues of $11.19 billion for the quarter. These numbers signify a remarkable surge — a staggering 316% increase in Nvidia’s earnings and a 67% rise in revenues on a year-over-year basis.

The estimates also represent a substantial increase from Nvidia’s first-quarter results, with EPS and revenues expected to surge by 126% and 70%, respectively.

NVIDIA has maintained an unwavering trend of surpassing analyst projections since the second quarter of 2015, save for a singular occurrence in the third quarter of 2022. The bar has been set very high: will the AI giant outpace expectations once again?

Nvidia Daily Chart

During the last three trading sessions, Nvidia displayed resilience by rebounding from the 21-day moving average support. This level, previously a robust resistance since the month’s inception, showcased the stock’s ability to reclaim its footing.

The Relative Strength Index (RSI) has crossed back above the 50 threshold, indicating a resurgence of buyer interest following the declines observed in the preceding weeks.

The Moving Average Convergence Divergence (MACD) initially sent a misleading bearish signal as it dipped below the zero line. Yet a subsequent bullish crossover around the zero line this week provided a more encouraging outlook.

Potential Scenarios: Navigating Nvidia’s Q2 Earnings

Bullish Scenario: Nvidia Beats EPS, Revenues

Should Nvidia surpass projected earnings and revenue figures for the second quarter, the stock’s trajectory could ascend to uncharted territory. The $382 peak stands tantalizingly close at just 3.5% above current prices, presenting the prospect of being breached with a positive quarterly performance.

Mixed Scenario: NVIDIA Reports Broadly In Line Or Misses 1 Estimate

A scenario of mixed results might incite profit-taking amid the backdrop of significant year-to-date gains. This could transpire without igniting a sharp market downturn. Support could be found near the 50-day moving average, approximately 6% beneath prevailing prices.

Bearish Scenario: NVIDIA Falls Short, Signals Concern for China Exports

A deviation from market expectations in which Nvidia falls short of profit and revenue projections could precipitate a sell-off. Instances of such disappointments in both EPS and revenues are a rarity, with a historical precedent back in the first quarter of 2015 resulting in a 7.4% drop in the stock’s value.

Should unfavorable results be accompanied by a less optimistic outlook linked to China’s economic issues, the potential sell-off could take on a more intense trajectory. In such a scenario, a revisit to the $400 price range becomes a plausible outcome.

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Photo courtesy of Nvidia.