February 22, 2024

Nvidia stock soars after earnings – how high can the share price go?

February 22, 2024

Nvidia stock is on the rise. No single company has symbolized the US market's artificial intelligence (Ai) frenzy as much as Nvidia Corp (NVDA), leaving Wall Street vulnerable to the volatility of its shares. This image shows the Nvidia logo and is related to an article on Nvidia stock.
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Nvidia stock is on a meteoric rise. No single company has symbolized the US market’s artificial intelligence (Ai) frenzy as much as Nvidia Corp. (NVDA), leaving Wall Street vulnerable to the volatility of its shares.

The semiconductor giant, whose chips are regarded as the gold standard in the AI business, estimated fiscal first-quarter sales well above expectations after the market closed on February 21, in one of the most anticipated earnings releases in recent memory.

In this article, CMTrading investigates Nvidia stock, unpacks the company’s finances, and provides valuable insights.

Nvidia stock – AI paving the way to profits

Given the company’s reputation as a bellwether of the AI industry and its substantial weighting in US indices, the way traders respond to its earnings release could provide an insight into whether risk appetite continues to thrive in the stock market. The market has glided to record highs despite rising Treasury yields and dwindling prospects that the Federal Reserve will start decreasing interest rates in the coming months.

Nvidia stock tripled in 2023 and is up nearly 40% in 2024 as investors become more optimistic about artificial intelligence’s business possibilities. This has made it a standout performer among the so-called Magnificent Seven, a group of growth and technology firms that have been the market’s primary drivers over the last year.

“Strong demand was driven by enterprise software and consumer internet applications, and multiple industry verticals, including automotive, financial services, and health care,” said Nvidia in a video release.

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In the middle of 2023, Nvidia’s market value exceeded $1 trillion. Earlier this month, it surpassed Amazon (AMZN) and Alphabet (GOOGL) to become the third-largest US firm by market value, though its latest drop has pushed it back to fifth.

The company’s higher market valuation has given it major sway in important indexes, including the S&P 500. As of February 22, Nvidia’s rising shares have accounted for more than a quarter of the index’s 4% rise, which reached a new high earlier this month.

Nvidia stock – Boom in Ai

Nvidia’s gain coincides with significant improvements in sales and profit due to the artificial intelligence boom, which has boosted demand for its chips. In its most recent fiscal year, revenue more than doubled to more than $60 billion, while net income increased by about $30 billion.

Analyst earnings projections have risen rapidly, implying that the company’s future earnings valuation has declined even as its share price has risen dramatically.

Before Wednesday’s news, the business traded at 31 times projected earnings, down from 47 times a year ago, according to LSEG data. According to data from options analytics service Trade Alert, Nvidia options were priced late Wednesday for a 10% swing in either direction in the two trading days after its findings.

A 10% increase in Nvidia’s over $1.7 trillion market worth would be similar to the present market capitalizations of Qualcomm (QCOM) and Comcast (CMCSA).

Nvidia’s shares rose 14% and 24% on the day after its quarterly releases in February and May of 2023 but the stock’s reaction has been more muted in recent quarters.

Nvidia Chief Financial Officer Colette Kress said: “We are delighted that supply of Hopper architecture products is improving,” Kress said on a call with analysts.

“Demand for Hopper remains very strong. We can expect our next-generation products to be supply constrained as demand far exceeds supply.”

Options bets on where Nvidia stock could go in the next several days spanned the gamut, with some traders targeting a loss below $500 by the end of this week and others predicting a climb to $1,300 by Friday, an almost double. Nvidia stock closed at $674.72 on Wednesday.

While Nvidia stock has been the poster child for AI, it is not the only stock that has benefited from the technology’s popularity.

Nvidia’s stock – Congress to address Ai

Shares of Super Micro Computer (SMCI), and Arm Holdings have risen in recent weeks, however, both have recently declined. Companies across industries are increasing their exposure to AI, in addition to semiconductors and technology.

In January and February, 38% of S&P 500 quarterly conference calls addressed artificial intelligence, somewhat higher than the June quarter, when AI became a key industry and market subject. NVDA) recently reported $22.1 billion in sales for the fourth quarter ending January 28, 2024, up 22% from the previous quarter and 265% year on year.

Nvidia stock: Earnings report

GAAP earnings per diluted share were $4.93, up 33% from the previous quarter and 765% from a year ago. Non-GAAP earnings per diluted share were $5.16, up 28% from the previous quarter and 486% from a year earlier.

In fiscal 2024, revenue increased by 126% to $60.9 billion. GAAP earnings per diluted share were $11.93, up 586% from a year earlier. Non-GAAP earnings per diluted share were $12.96, a 288% increase over the previous year.

Demand is rising globally, spanning enterprises, industries, and NVDA) recently reported $22.1 billion in sales for the fourth quarter ending January 28, 2024, up 22% from the previous quarter and 265% year on year.

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Nvidia stock – “Demand is rising globally”

Jensen Huang, NVIDIA’s founder and CEO, said: “Accelerated computing and generative AI have reached a tipping point. Demand is rising globally, spanning enterprises, industries, and nations.

“Our Data Center platform is driven by a growing number of different factors, including demand for data processing, training, and inference from large cloud-service providers, GPU-specialized suppliers, enterprise software companies, and consumer internet companies.

“Vertical industries, led by automotive, financial services, and healthcare, have now reached multibillion-dollar valuations. NVIDIA RTX, which was introduced less than six years ago, has grown into a massive PC platform for generative AI, enjoyed by 100 million gamers and creators.”

The coming year will feature significant new product cycles with remarkable advancements to help move our industry forward. Come join us at next month’s GTC, where we and our thriving ecosystem will reveal the exciting future that awaits,” he said.

NVIDIA will pay its next quarterly cash dividend of $0.04 per share on March 27, 2024, to all shareholders who were on record on March 6, 2024.

Nvidia Stock Outlook

NVIDIA’s outlook for the first quarter of fiscal 2025 is as follows:

Revenue is expected to be $24.0 billion, plus or minus 2%.

  • GAAP and non-GAAP gross margins are expected to be 76.3% and 77.0%, respectively, plus or minus 50 basis points.
  • GAAP and non-GAAP operating expenses are expected to be approximately $3.5 billion and $2.5 billion, respectively.
  • GAAP and non-GAAP other income and expenses are expected to be approximately $250 million, excluding gains and losses from non-affiliated investments.
  • GAAP and non-GAAP tax rates are expected to be 17.0%, plus or minus 1%, excluding any discrete items.

Nvidia stock – 233% increase in quarterly profits

Nvidia stock also expects a 233% increase in quarterly revenues for the current quarter, exceeding analyst expectations.

In addition to its AI chips, revenues at the company’s data centres have increased significantly. Its data centre division accounted for the great bulk of its revenues in the most recent quarter, having grown more than fivefold over the previous year.

However, the company stated that it was facing several obstacles, including supply-chain bottlenecks.

The United States has strengthened trade restrictions with China, the world’s second-largest economy. AI’s public profile has skyrocketed with the 2022 debut of ChatGPT, created by Microsoft-backed OpenAI.

ChatGPT and other related algorithms process massive quantities of data to generate convincing human-like responses to user questions.

They are likely to fundamentally alter the way people seek information online. Nvidia’s stock market value has increased by 225% in the last year, placing it among the most valuable corporations in the United States. Its stock price increased by more than 9% in prolonged New York trade.

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Nvidia’s stock – How Big is Too Big?

That’s the question on many investors’ minds on February 21, as they await Nvidia’s earnings report for the fourth quarter of 2023 after the market closes.

The California-based chipmaker has quickly risen to become Wall Street’s third largest firm, after only Microsoft and Apple, thanks in part to its vital position in the artificial intelligence boom – Nvidia controls practically the entire AI chipmaking industry in the United States.

However, with a market capitalization of $1.7 trillion and a year-to-date return of around 40% (the highest in the S&P 500), the corporation has a lot to live up to. Investors predict Nvidia to announce earnings of $4.59 per share and revenue of $20.378 billion, up from only $6.05 billion a year before.

That is why the US has invested $200 billion in the CHIPS and Science Act. While Intel and AMD compete, Nvidia remains the dominant player for the time being.

Because of its quick expansion, many retirement savings accounts, institutions, and life savings have a significant stake in the company’s success.

At the recent World Government Summit in Dubai, Nvidia CEO Jensen Huang urged that states consider establishing sovereign AI infrastructure.

That is, rather than leaving AI technology development to corporations, governments around the world should regulate it in order to best preserve their national security, economy, and culture.

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Trading involves a significant risk of loss and is not suitable for all investors. It’s important to understand the risks and seek advice from an independent financial advisor if necessary.

The information provided here does not constitute investment advice.

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