Nvidia’s Q1 Earnings Exceed Expectations with Strong Growth in AI Market

Nvidia, the American technology company famous for its graphics processing units (GPUs), has reported first-quarter earnings of $1.09 per share on $7.2bn in revenue, which is much higher than analysts were expecting.[0] The company also announced that it expects current-quarter revenue of $11bn, compared to expectations of $7.2bn in sales.[0] Based on other guidance data Nvidia has supplied for Q2, it is estimated that the net profit should total a little more than $4bn, with earnings per share potentially reaching $1.75.[1] This is a significant increase from Q1 and is a result of the company's focus on the growing market for accelerated computing and generative AI.[2] It is expected that a trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing, as companies race to apply generative AI into every product, service, and business process.[3]

Nvidia's performance has been boosted by the rising demand for its data center products that enable generative AI projects. The introduction of ChatGPT by OpenAI at the end of last year generated curiosity about this type of AI.[4] Nvidia's chips are the market leader in making that technology possible. The increasing interest in AI has also provided a boost to other businesses that provide the hardware needed to run complex models with billions of inputs.

The guidance for the current quarter is impressive, making Nvidia a high-quality company that is active in growth markets.[5] However, that does not mean that NVDA is a buy at every price and every valuation.[1] Those who bought Nvidia stock at the highs when it was trading well above $300 lost a significant amount of money when the stock eventually pulled back to the low $100s.[1] Although it may not recur, there is a possibility that stocks with a high valuation may undergo multiple compression, despite the underlying business growth being appealing.[1]

Despite this, investors seem to be bullish on Nvidia's future growth potential. Nvidia's shares were sent higher as the market responded with great enthusiasm to these results.[1] As of now, NVDA has surged by 18% in post-market trading, resulting in its stock price exceeding $360.[1] Should this be the case during regular trading hours on Thursday, the semiconductor behemoth will not only reach a fresh 52-week high but also surpass its previous all-time high.[1]

The price movement after the regular trading hours has resulted in an impressive increase of over $100 billion in Nvidia's market value, though its justification can be subject to debate.[1] The 24% rise in stock price means Nvidia is now worth $939.3 billion.[6] Tesla and Facebook, which are worth $584.7 billion and $647.6 billion, respectively, are worth less than that.[6] And it sits just behind the Big Tech companies of Apple, Google, Microsoft, and Amazon, and Saudi state oil giant Saudi Aramco — the only companies more valuable.[6]

Nvidia's solid performance has not only boosted its own stock but also shares of other AI-adjacent corporations like rival chipmaker Advanced Micro Devices, generative AI enthusiasts Microsoft and Google, AI software maker C3.ai and Palantir Technologies. However, it is important not to chase extended stocks, and a significant pullback and perhaps a new base over the next several weeks would not be a surprise.[7] There is a possibility for new opportunities in the future, but as of now, NVDA is not attainable.[7]

0. “Stock Market Today: Stocks Rise After AI Outlook Sparks Explosive Nvidia Rally” Kiplinger's Personal Finance, 25 May. 2023, https://www.kiplinger.com/investing/stocks/stock-market-today-stocks-rise-after-ai-outlook-sparks-explosive-nvidia-rally

1. “Nvidia Stock Soars On Blowout Guidance (NASDAQ:NVDA)” Seeking Alpha, 24 May. 2023, https://seekingalpha.com/article/4607157-nvidia-soars-on-blowout-guidance

2. “Nvidia is poised to beat an Apple stock market record” Quartz, 25 May. 2023, https://qz.com/nvidia-share-price-apple-stock-market-record-1850473639

3. “NVIDIA Announces Financial Results for First Quarter Fiscal 2024” NVIDIA Blog, 24 May. 2023, https://nvidianews.nvidia.com/news/nvidia-announces-financial-results-for-first-quarter-fiscal-2024

4. “Two of the world's most critical chip firms rally after Nvidia's 26% share price surge” CNBC, 25 May. 2023, https://www.cnbc.com/2023/05/25/tsmc-asml-two-critical-chip-firms-rally-after-nvidias-earnings.html

5. “2 Stocks to Play the AI Boom, From Nvidia CEO’s Earnings Call Remarks” Barron's, 25 May. 2023, https://www.barrons.com/articles/nvidia-stock-price-ai-adobe-servicenow-507a5c79

6. “Why is Nvidia stock going up? AI brings near trillion-dollar valuation” The Washington Post, 26 May. 2023, https://www.washingtonpost.com/technology/2023/05/25/nvidia-ai-stock-gpu-chatbots

7. “Futures Fall: Nvidia, AI Plays Soar, But This Is Terrible” Investor's Business Daily, 26 May. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-nasdaq-jumps-as-nvidia-chip-ai-plays-soar-market-breadth-terrible/

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