Market forecast projects strong Nvidia Q3 GPU sales growth to drive earnings expansion.

Nvidia is set to report its Q3 results on November 15, with forecasts showing low 20s percent growth in earnings on a year-over-year basis. Both the Tegra Processors and GPU segments are expected to see revenue growth in the high teens. The company has experienced a massive decline in cryptocurrency GPU sales in recent months, a trend expected to continue. Additionally, the 10% tariffs on Chinese goods that the U.S. put into effect in September could weigh on the company's overall earnings.

The GPU and Tegra Processor segments are forecast to see high teens revenue growth, with GPUs expected to reach $2.6 billion and Tegra Processors anticipated to reach $490 million in Q3. The Tegra Processor segment is expected to see continued growth in its SOC modules for Nintendo Switch, particularly given the approaching holiday season and expected higher Nintendo Switch sales. Beyond SOC modules, the company is experiencing growth on the automotive side, driven by its artificial intelligence platforms such as DRIVE PX, which are performing well in the market.

Within the GPUs segment, growth is expected to be primarily led by gaming GPUs, which are experiencing higher demand due to Max-Q technology, and the Datacenter segment, which is seeing strong demand for the Volta architecture. Datacenter sales were up 77% in the first half of 2018. While the decline in cryptocurrency GPU sales is well documented, the company expects negligible contribution from this segment. However, the tariffs imposed in September on Chinese goods could impact the company's performance in the near term.

Overall, GPUs are anticipated to be the key growth driver for Nvidia in Q3. The company's overall revenues are estimated to be a little under $3.10 billion in Q3, of which 84% can be attributed to GPUs, with Tegra Processors making up the remainder. The forecasted EPS is $1.63 for Q3 and $7.09 for the full year 2018. Using a TTM price to earnings multiple of 35x yields a price estimate of $248 for Nvidia, which implies a premium of over 30% to the current market price.

Nvidia's stock has declined by more than 20% over the past month, following weak Q3 numbers from other tech stocks and market reaction to the tariffs.