Learn of Today: Nvidia soared over 20% upon the strong earnings report.
Earnings highlights
For the quarter ended in April:
EPS: $1.09, adjusted, versus 92 cents FactSet consensus expected
Revenue: $7.19 billion, versus $6.53 billion expected
Record Data Center revenue of $4.28 billion
Prior to Wednesday's earnings, Nvidia had already experienced over 100% growth in its stock price in 2023 due to its leading position in the artificial intelligence chip market.
After the company released a strong earnings report and exceeded market expectations for Q2 outlook, Nvidia's stock surged by more than 20% in Thursday's premarket trading.
Shares of peers such as $Advanced Micro Devices(AMD.US$ and $Micron Technology(MU.US$ also saw price gains.
Outlook
In addition to its strong Q1 performance, Nvidia's positive guidance was a key factor in boosting market sentiment. The company attributed its success to increased demand for GPU chips from cloud vendors and prominent consumer internet companies.
These companies utilize Nvidia's chips for the purpose of training and deploying generative AI applications such as OpenAI's ChatGPT.
“We’re seeing incredible orders to retool the world’s data centers,” Jensen Huang, Co-Founder, CEO & President of Nvidia told analysts on a conference call. “The budget of a data center will shift very strongly to accelerated computing,” he said.
Nvidia (NVDA) guided for second-quarter revenue of $11 billion, plus or minus 2%. The market consensus, according to FactSet, was an expected revenue of $7.17 billion. While growth sustainability is a key factor in valuing a company, Nvidia did not provide a full-year forecast. Further details regarding the prediction can be uncovered during the earnings call, such as:
We believe that the supply that we will have for the second half of the year will be substantially larger than H1. Colette Kress, EVP & CFO of Nvidia told analysts on a conference call.
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Market Insights
Morgan Stanley has upgraded Nvidia's target price to $450 from $304 with an Overweight rating in its base case.
The transformational surge in AI spending is paying off much earlier than expected, as NVIDIA guided to revenue that we were forecasting they would hit in early 2025, as data center revenue surpasses combined Intel and AMD data center revenue. Reiterate OW.
Risks mentioned by Morgan Stanley:
Significant investment in new but unproven opportunities
Continuation of sluggish PC market (~50% of revs)
AMD reemerges as a viable GPU competitor
Cloud customers are able to develop competitive custom hardware
UBS has also upgraded the target price from $315 to $475 with a Buy rating.
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