NVIDIA Corporation (NVDA.US) Ends Seven-Day Decline Before Earnings; Institutions Say: Simply Exceeding Profit Expectations Isn't Enough, Capital Roadmap Becomes Key.

On the eve of NVIDIA Corporation's (NVDA.US) highly anticipated quarterly earnings release, Franklin Templeton fund manager Sara Araghi stated that the chip giant not only needs to deliver better-than-expected profit data but also must provide specific details to the market regarding capital allocation and maintaining its investment plans. "The market needs to see more detailed information about these investments, and how much value they can actually bring," Araghi said in an interview on Tuesday. Araghi specifically pointed out a significant divergence between NVIDIA Corporation's forward price-to-earnings ratio (currently about 21 times) and the expected growth rates of its revenue and profits. She believes this reflects that the market has already factored in expectations of a slowdown in growth, even as 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 conditions for next year," she analyzed. Against this backdrop, Araghi emphasized that it is crucial for NVIDIA Corporation to continue delivering profit growth. This is not only to appease 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's maintenance at around 75%a rare level among hardware companieswill inevitably be subjected to strict market scrutiny, especially under the pressure of rising upstream costs. She mentioned that NVIDIA Corporation has raised prices to offset the impact of rising storage costs. There have been reports indicating that NVIDIA Corporation has issued price adjustment notices to core clients such as Microsoft Corporation, Alphabet Inc. Class C, and Oracle Corporation, due to a significant rise in storage chip costs. Prices for servers equipped with its AI chips have generally increased by over 15%, covering flagship systems like Vera Rubin and Grace Blackwell, effective from early 2027. NVIDIA Corporation will announce its fiscal year 2027 second-quarter results after U.S. markets close on Wednesday, with market expectations for a 96% year-over-year revenue increase to $92 billion and an adjusted earnings per share of $2.09. Analysts have previously pointed out that, in the current market environment, a routine "earnings beat + raised guidance" may not be enough to significantly boost investor sentiment. NVIDIA Corporation's stock has dropped on the first trading day following earnings announcements over the past four quarters. It is worth mentioning that NVIDIA Corporation's stock price rose by 2.19% on Tuesday, ending a streak of seven consecutive days of declines, marking the longest losing streak since 2022.