Nvidia (NVDA.O) on Wednesday forecasted that its quarterly revenue surges by nearly three-fold, beating the estimates as the company banked on soaring demand for its high-tech AI chips, ending stock up by more than 10%.
The already high demand for the company’s Graphic Processing Units (GPUs) and data center chips continues to rise as more and more industries are looking to increase their AI offerings. Nvidia’s silicon is considered the best and dominates the AI chips global market, large tech firms like Microsoft (MSFT.O) being its major customers.Â
An analyst at Investing.com said that, “the market was poised to sell the news following Nvidia’s earnings, given the sky-high expectations and deteriorating macro conditions.”
“However, once again, the company left no doubt that the AI boom is much more than just a stock market narrative, but rather, the most significant bet from corporations worldwide at this moment.”
The end-day stock jump lifted the market capitalization of Nvidia by almost $130 billion, and pushed up the shares of other companies in the AI industry, including chip designing firm Arm holdings, which added nearly $160 billion of combined stock value.
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Better Than Expected Financial Results
Nvidia on Wednesday forecasted the first quarter revenue growth at 233%, higher than previously expected 208% by Wall Street. A similar thing happened in the first three quarters of 2023, when the quarterly revenue beat analysts’ expectations by 10 to 20%. This led to a surges in Nvidia stock on high AI demand.
They forecasted the revenue for the Q1 at $24 billion, with a deviation of 2%. However, it remained higher than the analysts expectations of $22.17 billion, but raised the concerns on how long it will be able to sustain its pace.
The company’s supply chains which have not been able to meet the ever-growing demand of Nvidia AI chips have seen an improvement in recent days. However, the CEO Jansen Huang told the reporters that it is nearly impossible to keep up with the demand in the short term.
Ben Bajarin, chief executive of consulting firm Creative Strategies said that “the biggest question on our minds for growth is how supply-constrained they remain and what demand looks like over time.”
Analysts expect that the Taiwan Semiconductor Manufacturing (TSMC)Â (2330.TW)advanced packaging capacity will improve in the first half of 2024, allowing Nvidia to mitigate the bottlenecks in the supply chain.
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Nvidia Performance
In the fourth quarter, Nvidia reported a revenue of $22.10 billion, contrast to the expectations of $20.62 billion. The adjusted earnings per share remained at $5.16, compared with estimates of $4.64.
Nvidia also expects its first quarter gross margins to be as high as 77%, with deviation of 0.5% which is higher than its previous estimates of 75.6%. This has helped the company to gain more than 30% in the stock value, making it a contender for a spot as the most valuable companies.
As of 20th Feb, the daily trade of Nvidia stocks topped at $30 billion for the pat 30 sessions, ahead of Tesla (TSLA.O) which averaged at $22 billion per day.
Earlier in December, the US commerce secretary told Reuters that the Biden administration is in talks with Nvidia about sales of AI chips to China.
