Nvidia reports earnings after the close on Wednesday. While some analysts have expressed concerns over how weakness in the tech sector could impact the semiconductor maker, one analyst believes there may yet be a silver lining.
Demand for data centers has remained resilient, and could be a life raft for chip companies like Nvidia (ticker: NVDA
) that are looking to shore up their bottom lines, wrote Citi analyst Atif Malik in a research note.
“We hear data center still remains an area of relative strength within semis, as consumer semis PCs and smartphone-related demand continues to come down,” he wrote.
Nvidia’s data segment makes up nearly 50% of sales, so any strength in that sector would be a boon to the company, he said. Malik expects Nvidia’s management to issue positive commentary during its earnings report, along with earnings that are in-line with expectations. The company could post an earnings beat in the July quarter, driven by data center strength, he added.
Wall Street is expecting Nvidia to post adjusted earnings of $1.30 a share when it releases its quarterly results on Wednesday. Revenue could clock in at $8.12 billion, analysts estimate, with $3.6 billion of that coming from the data center segment, according to FactSet.
Snap (ticker: SNAP) on Monday slashed its financial guidance for its fiscal second quarter, citing a challenging business environment. The warning set off alarm bells that echoed across the tech sector, prompting a selloff across the sector that left few unscathed, including Nvidia. Investors will be eagerly awaiting the semiconductor company’s results to see whether Snap’s economic challenges are as widespread as the market believes they might be.
Over the weekend, Nvidia said it was slowing down the pace of hiring, joining several tech companies that have decided to cut back amid rising costs.
Nvidia stock was rising 1% to $159.80 in premarket trading on Wednesday. The shares have lost 45% this year, battered by concerns over lagging consumer demand and overall pessimism in the sector.
Write to Sabrina Escobar at [email protected]
