Nvidia (NVDA) reported its second quarter earnings after the closing bell on Wednesday, beating expectations on the top and bottom line but still seemed to disappoint investors. Is this a sign of investor enthusiasm waning or is this a small bump on the road to a new record height?
S&P Global Ratings technology director Andrew Chang joins Catalysts to give insight into Nvidia’s recent earnings report and the current enthusiasm for the AI sector from investors.
For his view over Nvidia, Chang explains his AA- credit rating: “The credit rating’s AA- with a stable outlook. We upgraded the company back in April. And to put it plainly, Nvidia is the highest-rated semiconductor company globally, along with TSMC (TSM)… and Samsung Electronics (005930.KS) in Korea. So the highest rating from the semi perspective We really like the tech lead that the company has and the strong product execution, thus far.”
Chang outlines what could be a risk from a credit perspective: “The potential for short-term swings in demand despite the long-term massive growth potential. So this is not going to be an up and to the right every quarter. Hyperscalers, as you mentioned, they can’t spend fast enough. But if the ROI on their investments aren’t up to par, you could easily see Amazon’s and Microsoft’s pausing purchases for multiple quarters. They’ve done that before with general servers, so they could clearly do that with AI servers.”
He continues on with: “And when that day comes… I could see a scenario where the hyperscale spending declines meaningfully and that could cause some panic among investors. But we have to remember that this is a long-term growth story, that we should not be so fixated on short-term swings. ”
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