Nvidia Results Ahead

Chipmaker Nvidia (NVDA) puts the final bow on mega-cap earnings Wednesday, but the die for its results may have been cast nearly a month ago.

During Microsoft's (MSFT) quarterly earnings call back on April 25, Chief Financial Officer Amy Hood was asked about the impact of AI on the accelerating growth of Azure, Microsoft's cloud computing service.

"Right this minute, we do have demand that exceeds our supply by a bit," Hood told analysts, according to a transcript of the call.

Hood's comment, along with earnings from Meta Platforms (META) the day before, provided solid evidence of other mega caps stampeding to keep up with soaring demand for AI and the chips that power it. For now, Nvidia is the industry leader in the graphics processing units (GPU) that companies like Microsoft and Meta covet.

Nvidia's dominance might not last forever. Its closest competitor, Advanced Micro Devices (AMD), reported solid quarterly data center results driven partly by its AI chips. Also, the industry could face an outside threat from tech companies, including Apple (AAPL) and Alphabet (GOOGL), if they build their own chips. Earlier this month, The Wall Street Journal reported that Apple is developing AI chips for data centers.

In addition, Nvidia is beginning to lap some of the parabolic growth it enjoyed beginning with Q1 earnings a year ago when the AI opportunity began showing up in its revenue. That could make it a lot tougher to impress with revenue growth in coming quarters.

Nvidia, which is expected to report fiscal Q1 2025 earnings on Wednesday May 22 after Wall Street's close, saw its revenue triple from a year ago in the most recent earnings report. Even with AI chip demand running hot and Nvidia far ahead of the pack, the law of large numbers works against this kind of growth being sustained for long. Investors might have to begin paring their expectations a bit.