Nvidia faces stiff test on Wall Street this week after 'parabolic' stock rally

When Nvidia reports fiscal fourth-quarter earnings after the market close Wednesday, it will do so as the world's third most valuable public company. Investors are giving the company little margin for error.

Nvidia's stock price has soared fivefold since the end of 2022, as demand has skyrocketed for its graphics processing units that sit at the heart of the artificial intelligence boom. Nvidia's chips, such as the H100, are used by AI developers to create cutting-edge models like the ones OpenAI used to develop ChatGPT.

The company's market cap climbed to about $1.8 trillion last week, surpassing Alphabet and Amazon and now trailing only Microsoft and Apple.

"NVDA's stock appreciation has been parabolic," analysts at Bank of America wrote in a report Thursday. They reiterated their buy rating and said, "We think one interpretation of this NVDA move is a mix of fear and greed and indiscriminate investor chase for all things AI."

The other megacap tech companies all reported quarterly results weeks ago. All eyes are now on Nvidia.

Analysts are expecting a startling 240% increase in revenue from a year earlier to $20.6 billion for the period ending Jan. 28, according to LSEG, formerly known as Refinitiv. For every new dollar of sales the company generates, it's squeezing out even more profit.

Net income likely surged more than sevenfold to $10.5 billion from $1.41 billion a year earlier. In the third quarter, Nvidia's gross margin jumped to 74% from 53.6% the prior year.

Outsize growth is expected in Nvidia's data center business, which includes its AI chips. Analysts project an almost fourfold increase in revenue on an annual basis to $17.06 billion, according to FactSet.

Wall Street will be listening closely to commentary from