NVIDIA Corporation (NVDA.US) ends its seven-day decline before earnings; institutions say: just exceeding profit expectations isn't enough, the capital roadmap is key.

Ahead of NVIDIA Corporation (NVDA.US) highly anticipated quarterly earnings release, Franklin Templeton fund manager Sara Araghi stated that the chip giant not only needs to deliver earnings data that exceeds expectations but also needs to provide the market with specific details about capital allocation and maintaining its investment plans. "The market needs to see more details about these investments and the value they can actually deliver," Araghi said in an interview on Tuesday. Araghi specifically pointed out a noticeable divergence between NVIDIA Corporation's forward price-to-earnings ratio (currently around 21 times) and the expected growth rates of its revenue and profits. She believes this reflects that the market has already accounted for expectations of a slowdown in growth, even though the current expansion momentum remains strong. "NVIDIA Corporation's growth is indeed phenomenal, but a slowdown is coming, and the market is looking ahead and starting to anticipate next year's situation," she analyzed. In this context, Araghi emphasized that consistently reporting earnings growth is crucial. This is not only to reassure Wall Street but also to prove that the company has sufficient free cash flow to support future investments. "Moreover, they also need to allocate some funds for stock buybacks," she added. From the perspective of gross margins, Araghi believes that NVIDIA Corporation maintaining around a 75% "seventy-five" level is quite rare among hardware companies, which will inevitably face strict scrutiny from the market, especially under rising upstream cost pressures. She noted that NVIDIA Corporation has raised prices to offset the impact of rising storage costs. Reports have indicated that NVIDIA Corporation has issued price adjustment notices to core clients such as Microsoft Corporation, Alphabet Inc. Class C, and Oracle Corporation, given the significant increase in storage chip costs. The prices of servers equipped with its AI chips have generally risen by over 15%, affecting flagship systems like Vera Rubin and Grace Blackwell, and will take effect from the beginning of shipments in 2027. NVIDIA Corporation is set to announce its second-quarter earnings for the fiscal year 2027 after the U.S. stock market closes on Wednesday, with the market expecting a year-on-year revenue increase of 96% to $92 billion and an adjusted earnings per share of $2.09. Analysts have previously pointed out that in the current market environment, a typical "earnings beat + guidance upgrade" may not be sufficient to significantly boost investor sentiment. NVIDIA Corporation's stock price has declined on the first trading day following earnings announcements for the past four quarters. It is worth noting that NVIDIA Corporation's stock price rose by 2.19% on Tuesday, ending a streak of seven consecutive trading days of losses, which is the longest consecutive decline since 2022.