Nvidia (NVDA) once again cemented its status as Wall Street’s market darling after an upbeat AI-powered earnings call and outlook shook the already bullish analysts’ financial models.
Shares of the chip giant rose 27% in pre-market trading Thursday as results beat analyst estimates. The company’s ticker page was the most active on Yahoo Finance’s platform, closely followed by rival chip players such as AMD (AMD) and Intel (INTC).
If Nvidia’s pre-market gains continue, the company’s market capitalization will increase by more than $200 billion, which is the largest single-day rise in history. Apple’s sales of $191 billion in November 2022 are the current record holders.
It was Nvidia’s outlook that really surprised the investing crowd.
The company expects second-quarter revenue of about $11 billion, plus or minus 2%. Wall Street was expecting $7.2 billion.
Nvidia founder and CEO Jensen Huang told analysts on a conference call that the overly optimistic forecast reflects a fundamental shift toward accelerated computing. This, in turn, places a high demand for Nvidia chips that generate artificial intelligence.
“We’re seeing incredible demands to retool data centers in the world. And so I think you’re seeing the beginning of, or call it, a 10-year transition to basically recycle or restore global data centers and build them up as accelerated computing,” Huang said. “You’re going to have a very big shift in center spending. Data from traditional computing and computing acceleration with SmartNICs, smart switches, and of course GPUs and the workload will be mostly AI.”
This is the vibe on Wall Street after Nvidia’s big quarter and expectations.
Robin Roy, Stifel (rating comment; price target $370, up from $300): “Nvidia’s recent momentum continued as first-quarter results beat consensus expectations and the company’s second-quarter revenue forecast was well above high expectations. Nvidia remains well-placed for AI infrastructure portfolio share as accelerated computing network construction continues. As the company’s data numbers continue to grow centers, and questions about the near-term supply environment are likely to persist.For the time being, while not providing clear long-term guidance, Nvidia management noted that demand visibility related to the data center has increased and that the company has purchased significantly more supply for the second half of the year. We raise our estimates and price target and continue to view Nvidia as the best beneficiary of the near-term CSP capital spending trends.”
Tristan Gera, Byrd (outperformance rating, upgrade from hold; price target $475, up from $300): “We raised our ratings above consensus and added a Fresh Pick designation to Nvidia on March 20 reflecting our channel’s comments about strong H100 orders specifically related to ChatGPT emerging in March but failing to upgrade at that time. As AI-related demand momentum continues in the second half, Annual earnings of $10 are on hand in 2-3 quarters from our point of view, reflected in our post-earnings valuation. Our elevated EPS forecast for the next two years assumes continued AI-related momentum driven by two secular growth trends: Continuous adoption and an acceleration rate. based on parallel processing in data centers, and the emergence of AI models specifically related to ChatGPT and LLMs [large language models], all of which require GPUs. “
Atif Malik, Citi (Rate Buy; $420 target price, up from $353): “While we raised our price target and our earnings estimates, the upside for generative AI was greater than we expected. Nvidia expects data center sales to nearly double in the July quarter driven by Gen AI demand from CSPs, consumer internet companies, and accelerated computing in enterprises. Nvidia estimates that about Only 4% of the data center’s $1 trillion installed CPU base over the past four years has been GPU accelerated, which means AI adoption is still in its early infancy.”
Dan Ives, Widbush (no rating/price target): “There is no single better indicator of underlying AI demand underway in the super-enterprise/cloud market and the enterprise market in general than the Nvidia foundational story. We look at Nvidia at the heart and lungs of the AI revolution given its core training on chips and deployment of generative AI applications such as ChatGPT.The Street was waiting last night for Nvidia’s quarter and guidance to gauge the size of the AI demand story with many skeptics saying the AI bubble is forming and instead Jensen & Co. has provided guidance for the ages.”
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