As Nvidia (NVDA -2.89%) gears up to report its fiscal fourth-quarter results, analysts anticipate a strong performance that could surpass expectations and boost its outlook. Despite market jitters following DeepSeek’s AI breakthrough, Nvidia remains dominant in the AI hardware industry, with its new Blackwell chips set to drive future growth.
Nvidia Poised to Beat Estimates Amid AI Expansion
According to FactSet analysts, Nvidia is expected to report a staggering $38.1 billion in revenue. Market experts, including Kevin Cook, senior stock strategist at Zacks Investment Research, believe the company will not only meet but exceed expectations, quelling investor anxiety sparked by DeepSeek’s cost-effective AI models.
Cook stated, “Nvidia’s upcoming earnings will crush the DeepSeek anxiety. The company dominates the technology stack that enterprises want and the next stacks they don’t even know they need yet.”
The DeepSeek Disruption: AI Costs and Market Confidence
DeepSeek, a Chinese AI startup, disrupted the market in January with its DeepSeek-V3 model, which reportedly achieved performance levels on par with OpenAI and Meta (META -3.54%) but at a fraction of the cost. This led to a 17% plunge in Nvidia’s stock, erasing nearly $600 billion in market value—a record single-company loss in the U.S. market.
Despite fears that AI spending would slow, tech giants, including Alphabet, Amazon (AMZN -3.06%), Meta, and Microsoft, increased capital expenditures to $325 billion, demonstrating their commitment to long-term AI infrastructure.
“This is a long-term buildout for these goliaths,” Cook explained, emphasizing that companies are making multi-year bets on AI-driven technologies rather than seeking immediate returns.
Nvidia’s Growth Strategy and Market Adaptation
Even as training costs for generative AI decline, John Belton, a portfolio manager at Gabelli Funds, suggests that overall AI investment remains high. “DeepSeek didn’t introduce anything fundamentally new about lower costs leading to higher AI adoption, but it did slightly accelerate the rate at which training costs are declining,” he noted.
Another factor impacting Nvidia’s near-term performance is U.S. government scrutiny of AI chip exports to China. Despite regulatory concerns, Chinese tech firms like Tencent (TCEHY +1.18%), Alibaba (BABA +3.47%), and ByteDance have significantly increased orders for Nvidia’s H20 chips, which are designed to comply with U.S. export restrictions.
Blackwell Chipset and Gross Margin Concerns
As Nvidia launches its next-generation Blackwell chipset, analysts are keeping a close watch on potential overheating issues that could impact production costs and profit margins. Kevin Cook cautioned that investor sentiment could shift if Nvidia’s gross margins dip below 73%.
Analysts Expect Strong Guidance for Fiscal Q1
Despite supply chain challenges, Jefferies (JEF -1.88%) analysts remain confident in Nvidia’s ability to outperform expectations. FactSet forecasts Nvidia’s fiscal first-quarter guidance to reach $42 billion, reinforcing market optimism.
Joe Tigay, portfolio manager of the Catalyst Nasdaq-100 Hedged Equity Fund, stated, “I think there was concern that DeepSeek would lead major companies to cut capital expenditures. However, we’ve seen significant capex from these companies, and the market no longer seems worried about it. Nvidia’s guidance should further confirm that.”
With a strong earnings outlook, robust AI spending, and new technological advancements, Nvidia’s upcoming earnings report is set to be a pivotal moment for the AI industry and tech investors alike.
