Quarterly earnings are market-changing events that can significantly impact how the market perceives a stock. They can also affect companies in the same industry, so it's useful to tune into these events to hear what management teams have to say, even if you don't own shares in that particular company.
One event that Nvidia (NVDA -0.82%) investors should be aware of is Advanced Micro Devices's (AMD -1.80%) earnings call on Aug. 5. AMD and Nvidia are direct competitors in the data center computing space, and if AMD's data center division shows strength, Nvidia's stock may react positively as a result. The opposite is also true, as Nvidia's stock may fall if there's any perceived weakness.
So, what are the odds that Nvidia's stock surges after Aug. 5? Let's find out.
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Nvidia holds a dominant market share in the data center space
While AMD and Nvidia are significant companies in the data center space, Nvidia has a dominant market share. One analysis estimates Nvidia's data center GPU (graphics processing unit) market share at 90%. That's unbelievable dominance, and showcases that Nvidia's GPUs are far ahead of AMD's.
While the raw power performances may be negligible between the two, one area where Nvidia excels is the software deployed alongside its GPUs. Nvidia's CUDA software allows users to easily control how workloads are being processed within a GPU and how they interact in clusters. AMD doesn't have anything that rivals this, which is why it's significantly behind in the data center GPU race.
As a result, Nvidia's stock may not be as linked to AMD's as one may think. If AMD reports poor demand for Q2, it could be tied to Nvidia taking market share. However, if AMD reports strong demand for Q2, this could be seen as a sign of increased data center demand across the board, which could cause Nvidia's stock to surge.
Furthermore, AMD's business is more diversified than Nvidia's, as it also manufactures CPUs for computers, other components used in data centers, and embedded processors. So, if AMD's data center performs well and the other two divisions falter, the stock may decline. However, because Nvidia isn't as exposed to those industries as AMD is, it would have no reason to tumble.
In my opinion, AMD's earnings can do no harm to Nvidia's stock, unless AMD makes a statement along the lines of, "Data center demand for GPUs has completely dried up." However, we know that this isn't true.
Data center demand is unlikely to show weakness
Multiple AI hyperscalers already raised their record-setting capital expenditure budgets for 2025. Alphabet raised its capital expenditure guidance from $75 billion to $85 billion, primarily due to the acceleration of data center construction and the purchase of additional servers. This indicates that the demand for data center computing hardware produced by AMD and Nvidia remains incredibly high.
Meta Platforms similarly raised its capital expenditures from a range of $60 billion to $65 billion to a range of $64 billion to $72 billion during its Q1 results, citing the same reasons. Data center demand isn't decreasing, so it's unlikely that AMD will report poor data center results due to a decline in demand.
This means AMD will either rise to the occasion and succeed in winning more business or continue playing second fiddle to Nvidia. Either way, Nvidia's stock is unlikely to be negatively impacted by the news. However, if AMD reports that demand is soaring, Nvidia's shares may respond positively as a result. Nvidia remains my preferred way to invest in the AI arms race, and scooping up shares before various positive earnings catalysts are reported is a wise idea.
