NVDA vertical integration and AI boom

What happened: Nvidia, the world's most valuable chipmaker, is set to report over $92 billion in quarterly revenue on Aug. 26, following a strong earnings season with profits up 50% year-over-year for S&P 500 companies. Nvidia consistently beats Wall Street estimates, with 10 EPS beats in the last 11 quarters. Meanwhile, AI infrastructure stocks like CoreWeave (CRWV) and Super Micro Computer (SMCI) surged on upbeat forecasts, signaling booming demand for AI computing capacity. Amazon's Anthropic stake drove Q2 EPS to $5.75, potentially forcing analysts to rework AMZN and MSFT valuations higher. Nvidia is becoming more vertically integrated, taking interests in power-securing companies for data centers.

Market impact: The AI boom is driving demand for Nvidia's chips, with Alphabet spending about 60% of its technical infrastructure investment on servers built around Nvidia's AI chips, now facing price increases of over 15%. This narrative affects AI-focused companies, data center operators, and other chipmakers like AMD. Nvidia's earnings could reprice the stock and impact the broader tech sector.

What to watch next: On Aug. 26, Nvidia's earnings report will determine if the stock falls for a fifth consecutive quarter, as predicted by some analysts. Additionally, investors will watch for any updates on Nvidia's vertical integration strategy and potential impacts on data center operators' capital expenditure. Lastly, the upcoming IPO of Anthropic could reprice other AI stocks, including Nvidia, based on its valuation.