• Nvidia’s Q1 2025 earnings to be announced on Wednesday after the market closes
• Analysts expect triple-digit earnings growth as Nvidia dominates AI industry
• Profitability metrics, forward guidance, and spending plans will be closely watched
• Nvidia might initiate another bull run if it renews AI optimism

More than 80% of businesses have already reported their earnings, presenting better-than-expected statements and a rosy guidance for the coming quarters, which came in as a recognition of the upbeat US macro conditions. In contrast to the previous season, the artificial intelligence buzzword was less effective, unable to impress investors and lift stock markets to fresh record highs. AI-linked chip stocks such as Super Micro and Advanced Micro devices could not capitalize after their results fell short of the high expectations.

Instead, investors appeared more sensitive to corporate developments, such as buybacks and dividend increases, as well as to production cost reductions. This partially reflected that traders have likely started to pay attention to financial benefits and seek signs of improved productivity from the widespread adoption of the new technology, although the rewards might take time to clearly emerge.

How the market reacts to Nvidia’s Q1 earnings next Wednesday will indicate whether traders have become more conservative. The California-based company, which became synonymous with the AI revolution, was the tailwind of the stock boom in January, topping its Nasdaq 100 rivals’ year-on-year and becoming the third best performer within the S&P 500 community after losing some ground from Super Micro computer and Vistra corporation recently. In the aftermath of its stock price surge, its market cap of $2.32 trillion surpassed Alphabet’s $2.14 trillion and Amazon’s $1.96 trillion and was almost double Meta platforms’ 1.22 trillion too.

The question that arises now is whether the high-flying stock will repeat its meteoric rally when its Q1 2025 earnings come out on Wednesday after the market closes. Analysts expect another eye-popping report, with a record-breaking annual revenue growth of 244% and a quarterly increase of 12% to $24.7bln on the back of its data center activities such as AI training and graphic workloads. Likewise, earnings per share (EPS) could jump by a historic annual rate of 411% and register a remarkable quarterly growth rate of 8% to $5.57.

Profitability metrics might keep traders impressed too. Nvidia’s gross profit margin is expected to hit a new peak at 77%, deviating further above the industry’s median. Recall that Super Micro’s and Advanced Micro figures have been below 20% and around 50% respectively on average over the past couple of years. The company’s return on equity (ROE) is also attractive at 90%, the highest within the semiconductor group, which has a mean of -4.63% and a median of 8.98%.

In terms of valuation, though, Nvidia’s forward 12-month P/E ratio is relatively overstretched at 35x when compared to Nasdaq 100's of 26x and versus rivals’ scores such Intel’s 23x. However, this is not so concerning, as the future looks bright for the king of the AI industry. Wall Street brokers and other key investors believe that the company could further accelerate computing and large language models, consequently raising their price targets above the $1,000 threshold. Recommendation from Refinitiv analysts is "buy".

There are no official dates announced about the next product releases, though rumors suggest that the next generation of faster and memory-enhanced graphic cards RTX 5080 and RTX 5090 will be out before the Christmas-New Year holiday season kicks off or early in 2025. The cost-effective trillion-parameter NVIDIA Blackwell Platform, which Amazon, Dell and Meta are expected to adopt among other important tech companies, could also come to Google cloud early in 2025. Investors might learn more when Nvidia and its rivals such as AMD and Intel present their next key-Gen products during the Hot Chips 2024 talks in August. The event could also be important for Nvidia to study its competition before revealing its new products.

The battle on the AI front might further intensify as new entrants, big and small, are already designing their own alternative products. With demand for the new technology expected to heat up and Nvidia already owning the whole pie with a 70-90% market share, the company might struggle to meet delivery orders, forcing customers to seek substitutes.

Any updates on the pricing structure could be valuable for investors given the volatile commodity prices and the global geopolitical tensions, including a potential worsening US-China trade war. Recall that US regulators have blocked exports of Nvidia and AMD’s high-powered GPUs to China.

A potential stock split announcement could be good news to investors who want to buy the stock at a cheaper price.

As regards the market reaction, an upbeat earnings report accompanied by a rosy forward guidance and signs of early productivity gains or supply shortages could swing global stock markets to the upside. Technically, for that to happen, Nvidia’s stock needs to jump above the $959-$973 wall which halted the record rally in March. If that ceiling cracks, the price could rise exponentially towards the $1,025-$1,050 region, where the tentative ascending line that connects the 2021 and 2023 highs is placed. A steeper increase might hit the 161.8% Fibonacci extension of the previous downfall at $1,100.

Otherwise, if the earnings report is overestimated, and the guidance does not impress investors, the price might seek shelter near the $920 territory and the broken constraining line from April 2023. Slightly lower, the shorter-term ascending line from April’s low could next come to the rescue along the 50-day simple moving average (SMA) near $885. The 23.6% Fibonacci retracement of the November-March uptrend could be the next pivot point near $835.