What Investors Need to Know Ahead of Nvidia's Earnings Report

• Nvidia appears likely to surpass Wall Street's expectations primarily due to the management's confidence in the company's data center business. The executive team has expressed clear visibility into the near-term sales within this segment, thanks to a substantial backlog of orders driven by high demand for Nvidia's AI-focused data center chips and products. While there may be less certainty regarding demand for other business segments, this is less concerning since the data center is Nvidia's primary market and a key driver of its overall results. The management's insight into upcoming sales gives them a solid basis for setting fiscal Q1 guidance, which they likely believe the company will outperform. Historically, Wall Street analysts have often underestimated Nvidia's growth potential, and it is anticipated that this trend will persist.

• Nvidia's data center operations remain at the core of its business focus, with supply limitations being the primary bottleneck for its AI chip segment. There's keen interest in updates regarding the pace at which Nvidia's manufacturing partners are scaling up to meet the robust demand for its AI GPUs.

• The AI market's swift growth is vital to the company's future worth, yet there are uncertainties about this sector. Questions linger about the rate of data center investment in 2024 and onwards. Cloud providers plan to increase AI investment beyond initial projections, and it's expected that a significant portion of this expenditure will benefit Nvidia. Additionally, there is curiosity about capital spending outside of the largest cloud companies, as investment by enterprises in software, financial services, healthcare, and similar industries also seems significant.

• How large is the market for AI accelerators? Advanced Micro Devices (AMD) has impressively raised its projection for the industry's total addressable market in 2027 to a remarkable $400 billion, a significant leap from the earlier estimate of $150 billion. While this expanded market valuation accounts for a range of chip types in addition to GPUs, it nevertheless indicates a considerable expansion in the GPU sector, where Nvidia maintains its leading position in the AI GPU arena.