[Moo Brief] NVDA Q2 Earnings Preview: Is NVDA Stock a Buy, a Sell？

Nvidia's stock experienced a decline of approximately 23% from mid-July to early August, with a closing price of $98.91 on August 7. The selloff was prompted by concerns that Nvidia's major tech clients might reduce their budgets for artificial intelligence expenditures, alongside rumors of potential delays in the release of Nvidia's Blackwell GPUs scheduled for later this year. The decline in stock value was further amplified by the departure or reduction of stakes by prominent investment funds in Nvidia, and pessimistic predictions regarding the company's shares were widespread on Wall Street.

As a key facilitator of AI, Nvidia dominates the AI chip market with an estimated market share ranging from 70% to 95%, with its GPUs powering supercomputers used by Meta and Tesla. Despite being a hardware company, Nvidia maintains high gross margins at 73.8% for fiscal 2024. The company's competitive advantage lies in CUDA, its proprietary software stack enabling developers to leverage Nvidia GPUs for accelerating machine learning tasks. Although attempts to move away from CUDA have faced challenges, Nvidia consistently enhances CUDA's capabilities to maintain market leadership. Rivals like AMD, Intel, and Google are making efforts to challenge CUDA's dominance.

Nvidia's upcoming Blackwell platform boasts an inference capability 30 times that of the current Hopper, while consuming 25 times less cost and energy. Nvidia is confident that customers will not delay Hopper orders due to the Blackwell launch. Demand for both Hopper and Blackwell platforms exceeds supply, a trend expected to continue into the next year. The forthcoming earnings report will offer more insights on the Blackwell rollout.

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