What the results could mean for broader AI plays

Chipmaker Nvidia (NVDA) is scheduled to report fourth-quarter earnings results on Wednesday, February 21. Stifel currently holds the Magnificent Seven technology stock component at a Buy rating with a price target of $865 per share.

Robin Roy, applied technology analyst at Stifel, examines several of the most important factors expected to impact Nvidia's earnings, including its AI infrastructure and CPU product pipelines.

“It's an unlikely situation where we see some kind of error and a downward spiral, but anything can happen, and certainly that would be seen as a meaningful negative, I would say, in the AI ​​ecosystem when we think about the broader companies that are involved here,” he said. Roy tells Yahoo Finance. “Throughout earnings season, the news has been fairly positive about expanding capital spending to include a lot of other companies that will benefit from AI infrastructure.”

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Editor's Note: This article was written by Luke Carberry Maughan.

Video version

Brad Smith: If NVIDIA goes out and fails to deliver, it's possible that a Goldilocks report will be the carpetbag for the broader markets, especially given how AI is fueling this rally?

Robin Roy: That's going to be tough because obviously there's a lot of expectations here. One of the things we've been talking about with our technical team here at Stifel is the concept of expanding AI infrastructure spending. We're starting to see that through things like AI networks. Companies that are exposed to the interconnection of GPU clusters, and then out to the rest of the data centers and the rest of the world.

And these numbers are rising, Brad. So I think it's an unlikely situation where we see an error and go lower. But anything can happen. This would certainly be taken as a very meaningful negative, I would say, in the AI ​​ecosystem, when we think about the broader companies involved here.

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But as I said, throughout earnings season, the news has been fairly positive about expanding capital spending to a lot of other companies that will benefit from AI infrastructure.

Sina Smith: Robin, you mentioned a moment ago that the GPU tech conference that's coming up next month, any idea — just give us an idea of ​​what you think the pipeline updates are going to look like or look like, what I think NVIDIA sees in terms of that growth opportunity, TAM, Total addressable market, here to chip in the long term.

Robin Roy: Yes. It's a great question because I think that's really the focus area that we've been looking at, is NVIDIA is expanding their technologies that go into this spending area. So, not just the GPU hardware, not just the software that goes with it or the networking products that are so necessary, but it's expanding. They're starting to charge a CPU for the first time in these types of deployments.

So they have an ARM based CPU. I think the pace of technology reaching the market is increasing. So, instead of putting GPUs on the market every couple of years, they try to increase it to introduce new technologies every year.

They've got, as you guys know, the H100 and H200 are the cutting edge of GPUs going into AI infrastructure designs. Today, they have a new set of technologies that we expect to launch later this year, which we will likely talk about.

And so I think it's really about expanding the technology that they bring to the table across both hardware and software, as well as networking. And so I think that's going to be an important area for investors to focus on.