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Chipmaker Nvidia (NVDA) is due to report its latest earnings this week, with expectations high around the company's results, having become known as the stock market's artificial intelligence (AI) darling.
Nvidia's (NVDA) fourth quarter results are due out on Wednesday and the company has guided to revenue of $37.5bn, plus or minus 2%, for the period. That compares to record revenue of $35.1bn (£27.8bn) in the third quarter.
Nvidia (NVDA) has a track record of delivering results that beat estimates, so expectations have become high around its earnings. This was shown to be the case in the third quarter, as even though Nvidia (NVDA) topped key revenue and earnings forecasts, gross margins were lower and its revenue guidance for the fourth quarter was just ahead of Wall Street expectations.
As the final Magnificent 7 company to report this earnings season, Nvidia (NVDA) will act as a critical test for AI demand, given its chip play a key role in facilitating this technology.
Nvidia (NVDA) shares tumbled last month after the release of a low-cost AI model by Chinese startup DeepSeek rattled investors as they questioned the level of spending on the technology by major tech firms. The drop in Nvidia (NVDA) shares wiped $589bn off its market value, marking the largest single-day loss in stock market history.
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Despite market jitters, companies are continuing to announce huge investments in AI. Chinese tech giant Alibaba (9988.HK, BABA) is reportedly planning to spend more than 380 billion yuan (£41.5bn) on AI infrastructure over the next few years.
At the same time, Bloomberg reported on Monday that Microsoft (MSFT) had started cancelling leases for a large amount of datacentre capacity in the US. Investment bank TD Cowen reportedly said this may reflect concerns over whether the company is building more AI computing than it will need long-term. Spokespeople for Microsoft and TD Cowen had not responded to Yahoo Finance UK's request for comment at the time of writing.
Looking to Nvidia's results on Wednesday, Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Despite the emergence of large language models which are cheaper to run, other signs, including huge infrastructure investment plans from tech giants like Meta (META), indicate that Nvidia’s (NVDA) high-end chips will remain in demand.
"Investors are expecting another mega number in terms of revenue growth — which is expected to land at 72%," she said. "Enthusiasm is still super-hot for AI investments, but given Nvidia’s (NVDA) mega growth spurt, expect some volatility ahead if the results don’t meet expectations."