Nvidia (NVDA)
06:49 PM ET 05/22/2024
Nvidia (NVDA), a dominant player in artificial intelligence (AI) technology, surpassed Wall Street’s projections for its fiscal first quarter and provided a stronger-than-expected forecast for the upcoming period. The company also declared a 10-for-1 stock split, sending Nvidia stock higher in after-hours trading.
Strong Financial Performance
The Santa Clara, California-based chipmaker reported adjusted earnings of $6.12 per share on revenue of $26 billion for the quarter ending April 28. This performance beat analysts’ expectations of $5.60 per share on $24.59 billion in revenue, as surveyed by FactSet. Compared to the same period last year, Nvidia’s earnings soared 461%, and sales climbed 262%.
This quarter marks the fourth consecutive period of triple-digit percentage growth in both earnings and sales for Nvidia.
Future Projections
Looking ahead, Nvidia anticipates generating $28 billion in sales for the current quarter, outpacing the consensus estimate of $26.62 billion. In the same quarter last year, Nvidia recorded $13.51 billion in sales.
Stock Market Reaction
Following the earnings report, Nvidia’s stock price increased by 5.9% to $1,005.89 in after-hours trading. Earlier in the day, the stock had dipped 0.5% to close at $949.50.
CEO Commentary
Nvidia CEO Jensen Huang stated, “The next industrial revolution has begun. Companies and countries are partnering with Nvidia to transform traditional data centers into AI factories to produce artificial intelligence.” He highlighted that AI will enhance productivity across industries, improve cost and energy efficiency, and create new revenue opportunities.
Data Center Growth
In the first quarter, Nvidia’s data center revenue surged 427% year-over-year to $22.6 billion, driven by strong demand for graphics processors to support AI applications. This segment also saw a 23% increase from the previous quarter.
Stock Split and Dividend Increase
Nvidia’s 10-for-1 stock split will be effective on June 7. Additionally, the company increased its quarterly cash dividend by 150% to a penny per share post-split, up from 4 cents to 10 cents per share pre-split.
Cloud Services and AI Demand
CFO Colette Kress mentioned that major cloud computing service providers were significant contributors to Nvidia’s data center business, accounting for approximately 45% of the segment’s revenue. Other notable customers include consumer internet companies, governments, automotive, and healthcare firms. Kress indicated that the demand for Nvidia’s GPUs is expected to exceed supply well into next year.
Growth Prospects
Jensen Huang emphasized the strong demand for Nvidia’s Hopper series processors, which are crucial for generative AI training and inference. He stated, “We are poised for our next wave of growth,” noting that the Blackwell platform and Spectrum-X present new opportunities in large-scale AI and Ethernet-only data centers. Nvidia NIM, the company’s new software offering, will deliver enterprise-grade generative AI across various platforms.
Accelerated Revenue from Blackwell Series
Nvidia has advanced its timeline for realizing revenue from the Blackwell series, with production shipments expected this quarter and a ramp-up in the third quarter. Data centers using Blackwell processors are anticipated to be operational by the fourth quarter.
Investor Concerns
Investors have been wary of potential impacts from U.S. trade restrictions with China and Nvidia’s ability to meet component demand. Analysts also expressed concerns about a possible sales dip in the Hopper series as the Blackwell series GPUs become available.
Industry Impact
Nvidia’s earnings report positively influenced other AI-focused companies. AI chipmakers Broadcom (AVGO), Advanced Micro Devices (AMD), Taiwan Semiconductor Manufacturing (TSM), and Astera Labs (ALAB) saw modest gains. ServiceNow (NOW), Microsoft (MSFT), Vertiv (VRT), and Powell Industries (POWL) also advanced, along with Super Micro Computer (SMCI) and Dell Computer (DELL), which both use Nvidia chips in their AI servers.
Market Significance
Wedbush Securities analyst Daniel Ives emphasized the importance of Nvidia’s report, noting its significant impact on Wall Street. Wedbush rates Nvidia stock as outperform, with a price target of 1,000.
Index Influence
Nvidia’s rising stock price has significantly impacted key stock market indexes and ETFs, including the S&P 500, Nasdaq 100, and VanEck Semiconductor ETF.
Upcoming Catalysts
Nvidia’s next major event will be Jensen Huang’s keynote at the Computex trade show on June 2, where other industry leaders from AMD, Intel, and Qualcomm will also speak.
Nvidia remains a prominent fixture on several IBD stock lists, including Leaderboard, IBD 50, Big Cap 20, Sector Leaders, and Tech Leaders. The company’s stock is also part of the Magnificent Seven stocks, which had a substantial run last year.
