In an interview with CNBC, Cantor Fitzgerald’s C.J. Muse said investor positioning could support NVDA stock, with many hedge funds and long-only investors still underweight the shares.
- C.J. Muse told CNBC three potential catalysts to watch for during Nvidia’s earnings call were a specific 2027 data-center revenue target, more detail on Nvidia’s support for neoclouds and its open-source AI efforts.
- Muse expects CEO Jensen Huang to focus on “at least one” of the three potential catalysts during the earnings call.
- Despite concerns around circular financing, inference market share and rising memory costs, the analyst said the risk-reward remains attractive for Nvidia.
Nvidia (NVDA) shares fell in midday trading Wednesday amid broader market weakness, but Cantor Fitzgerald analyst C.J. Muse expects the chipmaker to deliver a “monster beat” when it reports second-quarter earnings after the market close.
In an interview with CNBC, Muse said investor positioning could work in Nvidia’s favor, noting that many hedge funds remain underweight the stock or are using it as a funding short, while some long-only investors are also underweight. “I think we are going to get another monster beat,” he stated.
However, he also noted that the earnings reaction could depend less on Nvidia’s quarterly numbers and more on what CEO Jensen Huang says about the company’s competitive position, balance sheet and broader AI ecosystem.
NVDA stock fell 1.3% in midday trading Wednesday after briefly rebounding in the previous session. The latest decline comes after the shares suffered their longest losing streak since 2019 earlier this week, falling for seven consecutive sessions.
Nvidia Earnings: 3 Jensen Huang Updates To Watch
Muse flagged three areas he believes could “move the needle” for Nvidia shares following Huang’s comments during the earnings call.
First, investors could get a more specific revenue outlook for Nvidia’s data-center business in 2027. Muse noted that Nvidia previously outlined data-center revenue expectations through 2027, but a standalone 2027 figure could provide investors with greater visibility into the durability of AI infrastructure demand.
Second, investors will be watching Nvidia’s relationship with neocloud providers. Muse said Nvidia is increasingly helping these companies build out their infrastructure, which could support a more recurring revenue model over time. He stated that the neocloud ecosystem is helping accelerate AI adoption while creating additional demand for Nvidia’s products.
Third, Muse wants to see Nvidia expand its role beyond selling hardware through its investments in open-source AI models. Greater software and ecosystem exposure could allow Nvidia to capture more value from its customers and potentially change the market’s view of the company’s revenue model.
Muse hedged that he was not predicting Nvidia would provide all three updates, but said there was a “good potential” that Huang could focus on “at least one of them” during the earnings call.
Nvidia Valuation Still Looks Attractive To Cantor
Wall Street expects Nvidia to report second-quarter (Q2) revenue of about $92 billion and adjusted earnings of $2.07 per share, according to Koyfin data. Analysts also expect adjusted gross margins of around 75%, roughly unchanged from the prior quarter, and free cash flow of about $47 billion.
Despite the concerns surrounding Nvidia’s AI spending ecosystem, Muse stated that the stock's valuation leaves room for upside. He expects Nvidia to generate between $16 and $17 in earnings per share next year, putting the stock at roughly 12 times forward earnings based on his estimates.
How Is Retail Feeling About NVDA Stock Ahead Of Q2 Earnings?
NVDA stock was among the top trending tickers on Stocktwits at the time of writing. Retail sentiment around the AI bellwether trended in ‘bullish’ territory over the past day, accompanied by chatter at ‘high’ levels.
Investors on the platform debated which way NVDA stock is likely to move post-earnings, while a Stocktwits poll showed that most anticipate the shares will rally once earnings are in. Another poll showed that most retail traders are anticipating that Nvidia’s will beat Wall Street’s expectations on both revenue and earnings.
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NVDA stock has gained around 12% year-to-date and over 16% in the last 12 months.
Read also: BofA Analyst Says Nvidia Is ‘Checking Every Box’ Ahead Of Earnings, Sees $1B Daily Free Cash Flow By This Time Next Year
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