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Nvidia shares fell in trading after opening hours today – here is the reason why the share can be a solid purchase

What happened

Shares of Nvidia (NVDA 5.08%) fell in after-sales on Thursday, when investors reacted to the chip manufacturer’s lower than expected guidance. From 18:40 ET, Nvidia’s share price was down more than 6% after rising 5% earlier in the day.

So what

Nvidia’s revenue rose 46% year-over-year to $ 8.29 billion in the third quarter of fiscal year 2023, which ended May 1. This impressive growth was driven by an 83% increase in data center sales, to $ 3.75 billion, and a 31% increase in gaming revenue, to $ 3.62 billion.

“We delivered record results in data centers and games against the backdrop of a challenging macro environment,”[ads1]; said founder and CEO Jensen Huang in a press release. “The effectiveness of deep learning to automate intelligence drives companies across industries to use Nvidia for AI computing.”

Person working on a laptop in a data center.

Nvidia’s data center business is booming. Image Source: Getty Images.

Despite supply chain disruptions that have plagued the technology sector, Nvidia was able to manage costs efficiently. Its adjusted gross margin actually increased by 90 basis points (1 basis point equals 0.01%) to 67.1%. This, combined with Nvidia’s strong sales growth, contributed to the adjusted operating income growing by 55% to $ 3.96 million. Its adjusted earnings per share, on the other hand, increased 49% to $ 1.36.

What now

However, investors seemed to focus more on Nvidia’s financial forecast for the financial year 2023 second quarter. Management provided revenue of around $ 8.1 billion, which was below Wall Street’s estimates of more than $ 8.5 billion.

Nvidia noted that war in Europe and coronavirus-related shutdowns in China are likely to negatively impact sales results by about $ 500 million. Nevertheless, Huang highlighted the company’s promising list of new offerings coming later this year, and he remains optimistic that strong trends will continue to drive Nvidia’s long-term expansion. He said:

We are preparing for the biggest wave of new products in our history with new GPU, CPU, DPU and robot processors increasing in the second half. Our new chips and systems will greatly promote AI, graphics, Omniverse, self-driving cars and robotics, as well as the many industries these technologies affect.

Thus, patient, long-term investors may want to use the sale as an opportunity to buy the technology leader’s shares at a discount.

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