NVIDIA stock surges on record results, optimistic outlook

Stock markets rose Thursday, and one of the biggest reasons was the explosive earnings of one of the world’s largest companies. NVIDIA Corporation (NASDAQ:NVDA). The semiconductor stock, included in the Magnificent Seven, rose about 15% on Thursday to about $777 per share after the company beat earnings estimates.

As of February 22, Nvidia’s stock price is already up 61% year-to-date and 274% year-to-date, and shows no signs of slowing down.

Last year’s sales record

NVIDIA primarily makes graphics processing units (GPUs) for computers, gaming systems, and automobiles, but what has made it stand out are its artificial intelligence chips for accelerated computing in data centers that handle complex AI-related functions.

NVIDIA has had a tremendous run over the past year, which was evident in its fourth-quarter and full-year earnings report released Wednesday after the market closed. For the quarter ended January 28, 2024, NVIDIA posted a record $22.1 billion in revenue. This is a 22% increase from the explosive third quarter and a whopping 265% increase from the fourth quarter a year ago.

Net income for the quarter was $12.3 billion, or $4.93 per share. This is a 33% increase from the third quarter and a whopping 765% increase compared to the same period last year.

For the full fiscal year that ended Jan. 28, NVIDIA generated $60.9 billion in revenue, a 126% increase over the previous fiscal year. Net income was $29.8 billion, or $11.93 per share, up 585% from the previous fiscal year.

The main revenue driver was data centers, which accounted for most of the chipmaker’s revenue in the fourth quarter, at $18.4 billion. Data center sales also amounted to $47.5 billion in the fiscal year, accounting for approximately 78% of total sales. Large cloud providers like Microsoft (NASDAQ:MSFT) accounted for more than half of NVIDIA’s data center revenue.

“Our data center platform is driven by an increasingly diverse set of drivers: demand for data processing, training and inference from large cloud service providers and GPU specialty providers, as well as enterprise software and consumer Internet companies. Vertical industries led by automotive, financial services, and healthcare are now multibillion-dollar businesses,” Jensen Huang, founder and CEO of NVIDIA, said in the earnings report.

an optimistic outlook

According to NVIDIA’s outlook, it doesn’t appear that NVIDIA will be slowing down anytime soon. For the first quarter of fiscal 2025, the chipmaker expects revenue of $24 billion, which would be another record and more than last quarter’s $22 billion and more than three times the $7.2 billion it recorded in its first fiscal quarter a year ago. no see. Nvidia is targeting a gross margin of 76.3% in the first quarter, up slightly from 76% in the fourth quarter, and expects operating expenses to increase to $3.5 billion from $3.2 billion last quarter.

The company only provides guidance for the first quarter ahead, but in comments to analysts on the earnings call, Huang expressed optimism that their growth will continue over the long term.

“Basically, the conditions for continued growth from the ’24 calendar to ’25 and beyond are very good, and I’ll tell you why. We are at the beginning of two industry-wide transformations, both of which are taking place across the industry,” Huang said on the call.

The first transition is from regular computing to accelerated computing.

“As you know, general-purpose computing is starting to run out of steam. There’s no reason to update to more CPUs unless you can radically and dramatically improve throughput like before. So we have to accelerate everything. This is what NVIDIA has been pioneering for some time,” Huang said.

The second industry-wide transformation is generative AI.

“We’ve seen that generative AI is really creating a whole new application space, a whole new way of doing computing, a whole new industry, and that’s what’s driving our growth,” added Huang, who looks forward to AI data centers. “Every industry, every company, every region.”

NVIDIA has a high price-to-earnings ratio, but its forward P/E is around 33 and its five-year P/E growth rate is less than 1, so its valuation is very reasonable based on its impressive earnings growth.