In an interview with CNBC, BofA analyst Vivek Arya said investors are likely to pay closer attention to how Nvidia deploys the enormous cash it generates than to the earnings themselves.
- According to him, Nvidia’s ecosystem financing strategy is both “offensive and defensive.”
- Arya added that Nvidia’s AI financing risks are overstated relative to its earnings growth.
- Stocktwits retail investors are betting on a strong NVDA post-earnings rally.
Nvidia (NVDA) shares fell in morning trade, as the company heads into its second-quarter earnings report, with investors focused on more than just revenue and earnings per share.
In an interview with CNBC, Bank of America (BofA) analyst Vivek Arya stated that the company’s balance sheet, cash generation and ability to support the broader AI ecosystem could be more important to the stock’s next move. “From a fundamental perspective, it’s checking every box,” the analyst said.
Arya also flagged the scale of Nvidia’s cash generation, saying the company could generate $1 billion in free cash flow every weekday by this time next year. “There is no other company on the planet that has managed to do that,” he said.
NVDA stock fell over 1% in morning trade and was among the top trending tickers on Stocktwits at the time of writing. Retail sentiment around the Jensen Huang-led enterprise trended in ‘bullish’ territory over the past day, accompanied by ‘high’ levels of chatter.
The shares have closed in the red in seven of the past eight trading sessions, according to Koyfin data. So far this year, NVDA stock has gained around 12%.
Analyst Pushes Back On Circular Financing Concerns
The comments come amid renewed scrutiny of Nvidia’s investments and financing arrangements involving AI companies and cloud providers.
Arya compared current concerns with the vendor financing that became controversial during the telecom boom and bust, but said the underlying economics are different today.
“Ultimately, it’s the durability of demand,” he said, pointing to utilization rates across AI infrastructure. “Right now, the utilization is over 100%. Every top customer has said that they don’t have enough supply, so I think the cycles are fundamentally different.”
The analyst added that Nvidia’s support for smaller, non-investment-grade neocloud companies could be both offensive and defensive.
“Offensive because you’re funding disruptors, you’re creating a faster acceleration of adoption in the AI cycle, you’re extending the durability,” he said. “It’s also defensive because you’re promoting an ecosystem that will be more reliant on your core infrastructure as opposed to going and doing a lot of custom chips.”
Arya stated that Nvidia is trading at a discount relative to its earnings growth and that the company could increasingly become an important buyer of its own shares.
How Is Retail Feeling About NVDA Stock?
According to an ongoing poll on Stocktwits, most retail investors expect NVDA stock to rally post-earnings. Only 30% expect the stock to fall, with 16% anticipating a dip of over 5%.
One retail trader said that NVDA’s weak price performance prior to earnings could be a setup for a post-earnings spike.
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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. Investors anticipate that Nvidia will market estimates on both revenue and earnings.
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