Nvidia (NASDAQ:NVDA) is due to report earnings this week and while an above-consensus print is expected, the spotlight will be on guidance “as investors remain skittish on AI adoption,” Evercore ISI strategists said in a note.
Notably, only 5% of U.S. businesses currently utilize AI, according to Evercore. Moreover, hyperscale capital expenditures, which have been closely linked to semiconductor sales, are expected to slow down in the second half of 2024.
As AI continues to expand its influence across various sectors, periods of market weakness are seen as buying opportunities.
Signs of AI making inroads into traditionally difficult-to-automate sectors, such as retail, are emerging, strategists said, highlighting Walmart’s use of GenAI to enhance productivity.
Evercore said its Strategy team has updated its list of “AI Revolutionaries,” which includes companies that are showing increasing mentions of AI, improving earnings per share (EPS), and offering attractive relative valuations. Nvidia, Coca-Cola (NYSE:KO), and State Street (NYSE:STT) are on the list. Small-cap stocks and companies with significant buyback exposure are also included.
Nvidia will report its second-quarter earnings for fiscal 2025 after the market closes on Wednesday.
Analysts on Wall Street anticipate the chipmaker’s revenue to increase to $28.84 billion, which would represent more than double the revenue from the same quarter last year, according to estimates from Visible Alpha.
Net income is also expected to more than double from the previous year, reaching $14.95 billion.
Earlier this month, reports of delays in Nvidia's Blackwell chip caused a decline in the company's shares, though Nvidia has assured that production is still scheduled to ramp up in the second half of the year as initially planned.
Some analysts believe that investor concerns may be exaggerated, with minimal impact on customers.
Raymond James analysts, who noted that the delay might have a "modest" impact and could even boost demand for existing chips, anticipate that "management will downplay the speculated delays."