Nvidia earnings preview: Watching for DeepSeek AI fallout
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Nvidia investors will be watching for any clues on how the DeepSeek surprise is reshaping the AI chip giant's trajectory when it reports earnings Wednesday afternoon.
Why it matters: China-based DeepSeek's new AI model turned heads earlier this year with its stunning efficiency, raising questions about whether investment in the most advanced and costly chips is as necessary as once thought.
The big picture: Nvidia earnings have turned into a major quarterly event for a stock market increasingly driven by the AI economy.
- "For the past one-and-a-half years, Nvidia has beaten and raised every quarter," writes Dave Sekera, chief U.S. market strategist at Morningstar. "I think the market has now been conditioned for that."
- But what Nvidia and CEO Jensen Huang say about DeepSeek fallout may be more important than the company's recent financial performance.
Between the lines: Investors will looking specifically for any signs that tech customers are slowing their pace of capital expenditures.
- The Magnificent 7 — which includes Microsoft, Google and Meta — were expected to devote $325 billion toward CapEx in 2025, up $100 billion from 2024, according to Wedbush Securities analyst Dan Ives.
- "After speaking with many enterprise AI customers we have seen NOT ONE AI enterprise deployment slow down or change due to the DeepSeek situation," Ives wrote. "No customer wants to 'lose their place in line' as it is described to us for Nvidia's next gen chips."
Yes, but: While Nvidia's chips dominate demand for AI model training, only 40% of its GPUs are used for an increasingly important next phase, called inference training, according to Morningstar.
- AI training is a more computationally intensive process, notes S&P Global Market Intelligence. And for inference, there is expected to be increasing amounts of competition in chips.
What we're watching: Nvidia, however, may be ready for the transition. Its next-gen Blackwell chips are specifically "geared toward inferencing applications," S&P says.
- Nvidia's ramp-up in Blackwell shipments will be another key area of focus Wednesday.
- By the numbers: Investors are expecting quarterly revenue of $38.16 billion and net income of $19.74 billion, according to S&P Capital IQ.
The bottom line: Nvidia's ability to navigate the ever-shifting AI economy is being put to the test.
