- Investor expectations for Nvidia's upcoming earnings report are sky-high.
- JPMorgan said Nvidia's stock price could negatively react to a blowout earnings report.
- "The bigger the beat," the more the market will "think that supply is getting better," JPMorgan said.
All eyes will be on Nvidia after the market close today as the company releases its fourth-quarter earnings report, and investor expectations are sky-high.
And even if Nvidia exceeds investor expectations when it reports results and guidance, the stock could see a negative reaction, a Wednesday note from JPMorgan's trading desk said.
"If Jensen's GPU behemoth is able to report great numbers, and by 'great' I mean 4Q DC revs north of $20 billion with implied acceleration for Q1 DC," JPMorgan said, referring to data-center revenues, "stock might be fine but it will also beg the question as to whether or not supply is getting better."
Nvidia has been supply-constrained for its H100 GPU chips for months as demand has soared. The supply-demand mismatch was so bad over the summer that Elon Musk said Tesla couldn't buy them fast enough.
"We're using a lot of Nvidia hardware," Musk said on Tesla's second-quarter earnings call. "We'll actually take it as fast as they'll deliver it to us. Frankly, if they could deliver us enough GPUs, we might not need Dojo. But they can't. They've got so many customers."
But if supply constraints are starting to ease, it could be a bad sign for Nvidia, as that could lead to a supply glut, which is not uncommon for the semiconductor industry.
"The bigger the beat on guidance, the more the market is going to think that supply is getting better, and that there could be an inventory correction in 2H24," JPMorgan said.
With risks skewed to the downside for Nvidia's stock following its massive surge over the past year, it appears to be a lose-lose situation for the stock in the short term, with the bank saying that Nvidia's implied move of 11% is "definitely more than scary" if it misses analyst expectations.
"Soooo, bad is bad, good is fine/bad, but too good might be not good," JPMorgan said.
Here's what other Wall Street analysts are expecting from Nvidia's upcoming earnings report.