Last week, Nvidia posted an outstanding performance, driven by robust artificial intelligence-related businesses (thanks to ChatGPT). On Thursday, the company recorded its third largest daily gain in market capitalization in history (about $184 billion). The company is even poised to join the elite trillion dollar club, with its market cap now at over $963 billion. Its share price closed the week at about $390, a level not seen since July 2020.
The AI chip boom may also benefit other companies which are similar to Nvidia, for instance, Hewlett Packard Enterprise Co, which is described as a global edge-to-cloud company, actively engaging in the provision of information technology, technology and enterprise products, solutions and services. It operates through various segments, namely Compute (general purpose servers for multi-workload computing, workload optimized servers for demanding applications), High Performance Computing & Artificial Intelligence (HPC&AI) (offers hardware and software solutions to support specific use cases), Storage (provides workload optimized storage product and service offerings), Intelligent Edge (offers wired and wireless local area network, campus and data center switching, software-defined wide-area-network, network security and associated services to enable secure connectivity) and Financial (which provides flexible investment solution and consumption models that support business transformation).
In fact, HPE is working in collaboration with Nvidia in an effort to deliver an industry-leading portfolio of optimized AI solutions. Both seek to gain a major competitive advantage in the market, by combining HPE’s proven, easy, reliable and secure IT deployments with Nvidia’s world class AI technology. Could Hewlett Packard Enterprise bring good news about its Q2 2023 earnings which are scheduled to be announced this Tuesday (30th May), after market close?
Fig.1: Reported Sales of HPE versus Analyst Forecast. Source：CNN Business
In the previous quarter, HPE’s sales revenue achieved the best Q1 performance since 2016, at $7.8B, up 12% from the same period last year. Its annualized revenue run-rate (ARR) also exceeded $1B for the first time, following 26% gains from the prior-year period. Segment results displayed that 44.9% of the total revenue was generated from the Compute segment, at $3.5B. Both the HPC&AI and Intelligent Edge segments were recorded at $1.1B, Storage revenue at $1.2B, and Financial Services revenue at $0.873B. It is worth noting that revenue growth of the HPC&AI segment was recorded at the fastest pace, at +34% (y/y).
Fig.2: Reported EPS of HPE versus Analyst Forecast. Source： CNN Business
EPS of HPE in Q1 2023 was $0.63, up +10.53% from the previous quarter and up +19% from the same period last year. In the coming quarter, consensus estimates for sales stood at $7.3B, down -6.85% from the previous quarter, but up 9% from Q2 2022. On the other hand, EPS is expected to hit $0.49, down over -22% from the previous quarter, but up +11.4% from the same period last year.
Technical Analysis:
#HewlettPackard (HPE.s) rebounded higher after gaining ground at a year low of $13.65. The asset is currently testing the 100-day SMA. A better than expected earnings result may propel the share price higher, towards $16 (FR 23.6% extended from the lows in Sept 2022 to the highs in Dec 2022), followed by the resistance zone formed by the highs in April 2022 ($16.39 and $16.55.) Otherwise, if price breaks below $15.20 (FR 38.2%), it could imply a bearish continuation in which sellers may continue to push the price lower, towards the next support at $14.60 (FR 50.0%) and $13.95 (FR 61.8%).
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Larince Zhang
Market Analyst
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