Nvidia earnings will be major test for AI demand, market rally

🤖 I'm a bot that provides automatic summaries for articles: ::: spoiler Click here to see the summary Aug 21 (Reuters) - Nvidia (NVDA.O) investors expect the chip designer to forecast quarterly revenue above estimates when it reports results on Wednesday.

The blistering rally in its shares means that Nvidia has little room for any earnings-related disappointment and anything other than a higher-than-expected forecast could trigger a rout in its stock, some analysts have warned.

The results could also dictate the direction of the wider market this week, as most of the S&P 500's gains this year have come from the AI-driven rally in Nvidia and Big Tech stocks.

"I've been covering tech since 1994 and I have never seen an environment where you are so dependent on one company to deliver," said Inge Heydorn, partner at GP Bullhound, which owns both Nvidia and AMD (AMD.O) shares.

While the company's 12-month forward price-to-earnings ratio soared dramatically to more than 80 after its second-quarter revenue forecast of over 50% growth in May, it has come down since then as analysts raise their earnings expectations.

But they warned AMD will face an uphill battle in catching up with Nvidia's software CUDA, which is already the industry standard in AI and has a major head start over the company's similar offering.

Saved 69% of original text. :::