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Nvidia (NVDA) Q1 Earnings Preview: Weakness or Demand?

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Updated 25 May 2022

Key points:

  • All eyes on Nvidia for an insight into semiconductor demand
  • Fears of an economic slowdown are weighing on Nvidia bulls
  • Investors should look out for the $1.36B hit from its failed acquisition of ARM

It’s all eyes on Nvidia (NASDAQ: NVDA) after the closing bell today, as the US’s most valuable chip-maker is scheduled to announce its first-quarter earnings. In what could provide some relinquishment for heavily sold big tech, could also paint a worrying picture about the wider demand for semiconductors across a range of industries. There’s every chance that growing pent-up demand from ongoing shortages should benefit Nvidia, but general economic stagnation doesn’t bode well for the company. 

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Nvidia was one of 2021’s hot stocks, but the hype wasn’t able to sustain the share price for long as macro concerns started to weigh on big tech valuations. NVDA shares are currently down over 40% since the start of the year. 

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Today’s earnings release has the potential to ease bearish momentum, temporarily at least, or until rising interest rates pull at investor sentiment once again. Years of pent up demand and rising prices is starting to give way to wider fears of an economic slowdown, which would weigh directly on Nvidia’s trajectory for consistent growth. Semiconductor companies rely on strong sales across industries, so a wider slowdown could have a drastic effect. Also, a build up of inventories negatively influences bottom line growth. 

For bears, it isn’t headwinds that should be worth noting. As well as missing analyst expectations in the last quarter, Nvidia might also provide further details regarding the $1.36B hit from its failed acquisition of British semiconductor firm ARM. 

This being said, Nvidia should benefit from strong demand for semiconductors, despite strong headwinds. A shift back to positive fundamentals could inspire some uptick in price action, reaffirmed by a positive FY outlook.