What Wall Street Says
Nvidia ( NVDA ) has cemented its status once again as Wall Street’s market darling after upbeat AI-driven earnings and an outlook that shook the financial models of already bullish analysts.
Shares of the chip giant exploded 27% in pre-market trading on Thursday as the results bucked analyst estimates. The company’s ticker page was the most active on the Yahoo Finance platform, closely followed by rival chip players AMD ( AMD ) and Intel ( INTC ).
If the premarket gains in Nvidia hold, the company’s market value will rise more than $200 billion, marking the biggest one-day gain in history. Apple̵[ads1]7;s $191 billion pop in November 2022 is the current record holder.
It was Nvidia’s outlook that really surprised the investing masses.
The company expects second-quarter revenue to come in at around $11 billion, plus or minus 2%. Wall Street expected $7.2 billion.
Nvidia founder and CEO Jensen Huang told analysts on the conference call that the highly positive outlook reflects a fundamental shift to accelerated computing. This, in turn, places great demand on Nvidia’s chips that drive generative AI.
“We’re seeing incredible orders to rebuild the world’s data centers. And so I think you’re seeing the beginning of, call it, a 10-year transition to recycle or reclaim the world’s data centers and build it out as accelerated computing,” Huang said. “You’re going to have a pretty dramatic change in the consumption of a data center from traditional computing and accelerating computing with SmartNICs, smart switches, of course GPUs and the workload is going to be mainly generative AI.”
Here’s the mood on Wall Street after Nvidia’s big quarter and outlook.
Ruben Roy, Stifel (Hold rating; price target of $370, up from $300): “Nvidia’s recent momentum continued as its first-quarter results beat consensus expectations and the company’s second-quarter revenue outlook was significantly above high expectations. Nvidia remains in the sweet spot for AI infrastructure wallet share as accelerated data network deployment continues. As the company’s data continues. center count grows, questions whether the near-term supply environment is likely to continue. For now, while not providing explicit long-term guidance, Nvidia management noted that data center-related demand visibility has increased and that the company has procured significantly higher supply for the second half of the year. We raise our estimates and target price and continue to see Nvidia as the best-positioned near-term beneficiary of CSP capex spending trends.”
Tristan Gerra, Baird (Outperform rating, upgrade from hold; price target of $475, up from $300): “We raised our estimates above consensus and added a Fresh Pick designation to Nvidia on March 20, reflecting our channel feedback of strong H100 orders specifically related to ChatGPT that emerged in March, but we failed to upgrade on at that time. As AI-related order momentum continues into the second half, annualized earnings of $10 are reached within 2-3 quarters in our view, reflected in the post-earnings valuation. Our increased next two-year EPS forecast assumes continued AI-related momentum driven by two secular growth trends: continued use rate for parallel processing-based acceleration in data centers, and the emergence of AI models particularly related to ChatGPT and LLMs [large language models]all of which require GPUs.”
Atif Malik, Citi (Buy rating; price target $420, up from $353): “While we had raised our target price and estimates going into earnings, the upside for Generative AI was greater than we expected. Nvidia expects data center sales to roughly double in the July quarter driven by Gen AI demand from CSPs, consumer internet companies and accelerated enterprise computing . Nvidia estimates that only ~4% of the $1 trillion data center CPU installed base over the past four years has been GPU-accelerated, suggesting that AI adoption remains in its early stages.”
Dan Ives, Wedbush (no rating/price target): “There is no better indicator of the underlying AI demand going on in the hyperscale/cloud and general enterprise markets than the fundamental Nvidia story. We see Nvidia as the heart and lungs of the AI revolution, given the core chips that trains and implements generative AI applications like ChatGPT.The Street awaited yesterday’s Nvidia quarter and guidance to gauge the extent of this AI demand story, with many skeptics saying an AI bubble was forming, and instead provided Jensen & Co. guidance for the times.”
Brian Sozzi is Yahoo Finance’s managing editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Advice on the banking crisis? Email firstname.lastname@example.org
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