Here’s what Wall Street expects as growth looks set to slow

Leading AI chip supplier Nvidia reports first-quarter results after the market close on Wednesday, with Wall Street expecting some deceleration after its previous blockbuster growth.

Still, for the quarter ending in April, the numbers will be explosive as its chips remain in high demand for data centers used in generative artificial intelligence.

Analysts surveyed by FactSet expect earnings per share to rise 474% to $5.22, with revenue up 241% to $24.5 billion. That would be down from the previous quarter’s 765% increase in profit and 265% increase in revenue.

Meanwhile, the stock has surged 87% so far in 2024 and is up about 200% from a year ago. Nvidia is now the third most valuable company in the world, with a market capitalization of $2.3 trillion, behind Apple and Microsoft. But shares have remained essentially flat over the past two months.

Nvidia’s March unveiling of its new Blackwell chip prompted some analysts to expect a slowdown as it transitions from its older H100 chips to the next-generation models, which are expected to be released to the public later this year.

In a note published Thursday, Bank of America analysts flagged this deceleration as a potential source of volatility in Nvidia’s shares following the earnings release.

While BofA believes Nvidia is reporting strong numbers relative to the Wall Street consensus, analysts expect the company’s second-quarter guidance to mark the first time sequential growth will be below 10%.

At the same time, gross margins are expected to increase from around 77% in the first quarter to a “more normalized” range of 75-76% in the following quarter.

“However, even if NVDA were to potentially meet these bullish expectations, the stock could still react adversely as bears will likely complain about the following: 1) NVDA’s QoQ sales growth will slow to “only” 7-8 QoQ % in Q2 (July) outlook, well below mid-teens or better in recent quarters, 2) (gross margin) spike and decline is a sign of pricing pressure, mix unfavorable (more Chinese H20 shipments and/or more inference units) and a slowdown/easing of supply demand,” the note said.

For its part, BofA is bullish on Nvidia, giving the stock a “buy” rating and a price target of $1,100, which suggests a 19% upside from Friday’s close.

Last month, analysts at Morgan Stanley were also bullish on Nvidia, saying there was no sign of a pause in growth during the transition to the Blackwell chip, with underlying demand still strong .

“NVDA continues to see strong AI spending trends, with upward revisions in demand from some of the new customers such as Tesla and various sovereigns,” the analysts wrote.

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And despite growing competition from Intel, Huawei, Samsung and others, Morgan Stanley expects Nvidia to maintain its market share.

“Generation Blackwell pricing appears to make a strong statement about competition, reducing enthusiasm for competitive offerings,” he added.

This story was originally featured on Fortune.com