Nvidia’s stock heads for worst day since 2022, biggest market-cap loss ever

Nvidia was on pace to shed $112 billion in market capitalization on the day, which would mark its largest daily loss of market cap in its history, according to Dow Jones Market Data — with the decline double the $56 billion decline seen May 31, 2023.

The one-day decline was also on track to be more than the full market values of other large chip companies, including Micron Technology Inc.
MU,
+1.02%
($88 billion) and Analog Devices Inc.
ADI,
+0.46%
($93 billion).

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“Given Nvidia’s share price rally year-to-date…we believe overall market expectations have risen significantly as consensus earnings are now approaching our forecasts,” wrote HSBC analyst Frank Lee. Nvidia’s stock has surged more than 35% so far this year.

Lee and his team “see limited room for further earnings upside in 2024 relative to the sales and earnings surprise that we saw in 2023.”

Analysts tracked by FactSet anticipate that Nvidia logged $4.59 a share in adjusted earnings on $20.4 billion in revenue for its fiscal fourth quarter that ended in January. Adjusted earnings per share is expected to be up more than 400%, while revenue could more than triple.

The company is forecast to see similarly eye-popping numbers in the current quarter, with analysts modeling $5.02 a share in adjusted EPS, up more than 350%, and $22.2 billion in revenue, roughly triple what was seen a year before.

The setup for Nvidia looks “challenged” with the bar “so high,” according to Mizuho desk-based analyst Jordan Klein. A “potential stock move to downside feels a lot bigger than upside move,” he continued, though he also said he wasn’t making a call on the quarter, as it’s likely “a mistake to do so” with Nvidia.

Piper Sandler analyst Harsh Kumar noted that he was expecting the company to forecast data-center revenue $400 million to $500 million above the consensus view, which would imply about 10% growth on a sequential basis.

“If this result plays out, however, we feel the stock would remain flattish given the recent run up over the prior two months paired with the extremely high expectations going into the print,” he wrote.

See also: Three stocks of AI ‘enablers’ to consider as Nvidia sets up another possible surprise

Of interest will be Nvidia’s view on the China market as the company faces Commerce Department restrictions on sales into the country but has been working to modify products so that they can still be sold there.

“Importantly, the guide will most likely not include any revenues that come from newly developed chips for China,” Kumar wrote. “We see this revenue stream as potentially coming back on in the April quarter following reports late last year of a new export control compliant chip in the works.”

Morgan Stanley’s Joseph Moore noted that some think Nvidia’s guidance could call for more than $25 billion in quarterly revenue, but “while it’s possible revenues could get there,” he and his team “see the company
guiding more conservatively than that at least initially.”

Moore isn’t predicting “an immediate strong reaction” to an upbeat Nvidia report, though he also doubts the stock will sell off.

”Our investor conversations are mostly with clients constructive on the stock but worried about near term expectations being too high, which usually creates a benign setup,” he wrote.

Read: Nvidia is expected to be the best performer in the S&P 500 through 2025, by this measure

Raymond James’ Srini Pajjuri commented that any “near-term pullback” in Nvidia shares was likely to be “short-lived.”

He’s upbeat about the company’s forthcoming B100 product, which could see a “rapid rollout,” and noted that “processing power required for AI is seeing no signs of easing.”

Overall, he expects that Amazon.com Inc.
AMZN,
-1.87%
will prove a “key driver for the near term,” after Meta Platforms Inc.
META,
-0.86%
and Microsoft Corp.
MSFT,
-0.75%
were big customers in the past few quarters.