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Nvidia Earnings Show AI Boom Is Here to Stay: ETFs in Focus
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NVIDIA (NVDA - Free Report) stock, with a market cap of $1.16 trillion, is a blockbuster this year as it has skyrocketed 222% courtesy of high hopes from artificial intelligence (AI). A surge in Hyperscale demand and a solid uptake of AI-based smart cockpit infotainment solutions are acting as tailwinds.
No wonder, Nvidia’s Q2 earnings were much-awaited and the chipmaker didn’t disappoint investors. Yes, Nvidia breezed past analysts’ expectations. Shares surged more than 7% in the pre-market on Aug 24, reflecting the earnings strength.
Earnings of $2.70 per share smashed the Zacks Consensus Estimate of $2.09 per share. Earnings were up year over year by an astounding 429%. Revenues of $13.51 billion were even more staggering, easily sweeping past the $11.17 billion in the Zacks consensus. There was 101% year-over-year revenue growth in the quarter.
Not only this, Nvidia said that there will be 170% sales jump in the third quarter thanks to the demand for AI chips. Nvidia CEO Jensen Huang said on a call with analysts, “that trillion dollars of data centers is in the process of transitioning into accelerated computing and generative AI,” as quoted on CNBC.
AI Hype Seems to Pass the Test
The year 2023 can easily be attributed to the AI euphoria. While many began to fear that the AI boom was fully priced in at the current level and that the AI mania would take time to fully materialize, Nvidia's success in Q2 proves otherwise.
Nvidia’s performance was aided by its data center business, encompassing AI chips as cloud service providers such as Alphabet, Amazon, and Meta swiftly adopted next-generation processors, contributing to this success. The company reported $10.32 billion in revenue for the segment, up 171% year over year and above the $8.03 billion estimate, according to StreetAccount, quoted on CNBC.
AI Uptake: A Trillion-Dollar Opportunity?
Dan Ives of Wedbush Securities predicts that there will be a trillion dollars of additional spend over the next decade in the AI sector. It’s a tectonic shift like the emergence of the Internet in 1995 and the launch of the Apple iPhone in 2007. Analysts estimate a $12 billion opportunity in AI, as quoted on CNBC. AI has persistently flooded every sector of the society. From healthcare to transportation, entertainment to cybersecurity, AI has left its presence in every industry.
Flurry of Big & Small Deals
The AI market is thriving with deals and partnerships. Nvidia itself has been entering into numerous partnerships in the AI space. The companies that are collaborating with Nvidia are Amazon, Adobe, Google Cloud, Microsoft, Snowflake and AT&T.
The average AI deal size is up 48% in 2023, driven by mega-rounds. Q2'23 had seen 7 new AI unicorns — including 5 generative AI companies. M&A deals increase by 13% quarter on quarter, while public exits remain subdued.
Global AI funding — which jumped in Q1’23 due to OpenAI’s $10 billion round — fell to $9.4B in Q2, marking a 38% quarter-on-quarter decline. However, if barring OpenAI’s January mega-round, Q2 funding would have actually expanded 81% quarter on quarter.???
ETFs in Focus
Against this backdrop, below, we highlight a few AI ETFs that should be tracked closely in the coming days. These ETFs lost in the past one month and hence investors can employ the buy-the-dip strategy here.
iShares Robotics and Artificial Intelligence Multisector ETF (IRBO - Free Report) – down 10.2% Past One Month
ROBO Global Robotics & Automation Index ETF (ROBO - Free Report) – down 8.9% Past One Month
Global X Artificial Intelligence & Technology ETF (AIQ - Free Report) – down 3.2% Past One Month
First Trust Nasdaq Artificial Intelligence & Robotics ETF (ROBT - Free Report) – down 9.0% Past One Month
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Nvidia Earnings Show AI Boom Is Here to Stay: ETFs in Focus
NVIDIA (NVDA - Free Report) stock, with a market cap of $1.16 trillion, is a blockbuster this year as it has skyrocketed 222% courtesy of high hopes from artificial intelligence (AI). A surge in Hyperscale demand and a solid uptake of AI-based smart cockpit infotainment solutions are acting as tailwinds.
No wonder, Nvidia’s Q2 earnings were much-awaited and the chipmaker didn’t disappoint investors. Yes, Nvidia breezed past analysts’ expectations. Shares surged more than 7% in the pre-market on Aug 24, reflecting the earnings strength.
Earnings of $2.70 per share smashed the Zacks Consensus Estimate of $2.09 per share. Earnings were up year over year by an astounding 429%. Revenues of $13.51 billion were even more staggering, easily sweeping past the $11.17 billion in the Zacks consensus. There was 101% year-over-year revenue growth in the quarter.
Not only this, Nvidia said that there will be 170% sales jump in the third quarter thanks to the demand for AI chips. Nvidia CEO Jensen Huang said on a call with analysts, “that trillion dollars of data centers is in the process of transitioning into accelerated computing and generative AI,” as quoted on CNBC.
AI Hype Seems to Pass the Test
The year 2023 can easily be attributed to the AI euphoria. While many began to fear that the AI boom was fully priced in at the current level and that the AI mania would take time to fully materialize, Nvidia's success in Q2 proves otherwise.
Nvidia’s performance was aided by its data center business, encompassing AI chips as cloud service providers such as Alphabet, Amazon, and Meta swiftly adopted next-generation processors, contributing to this success. The company reported $10.32 billion in revenue for the segment, up 171% year over year and above the $8.03 billion estimate, according to StreetAccount, quoted on CNBC.
AI Uptake: A Trillion-Dollar Opportunity?
Dan Ives of Wedbush Securities predicts that there will be a trillion dollars of additional spend over the next decade in the AI sector. It’s a tectonic shift like the emergence of the Internet in 1995 and the launch of the Apple iPhone in 2007. Analysts estimate a $12 billion opportunity in AI, as quoted on CNBC. AI has persistently flooded every sector of the society. From healthcare to transportation, entertainment to cybersecurity, AI has left its presence in every industry.
Flurry of Big & Small Deals
The AI market is thriving with deals and partnerships. Nvidia itself has been entering into numerous partnerships in the AI space. The companies that are collaborating with Nvidia are Amazon, Adobe, Google Cloud, Microsoft, Snowflake and AT&T.
The average AI deal size is up 48% in 2023, driven by mega-rounds. Q2'23 had seen 7 new AI unicorns — including 5 generative AI companies. M&A deals increase by 13% quarter on quarter, while public exits remain subdued.
Global AI funding — which jumped in Q1’23 due to OpenAI’s $10 billion round — fell to $9.4B in Q2, marking a 38% quarter-on-quarter decline. However, if barring OpenAI’s January mega-round, Q2 funding would have actually expanded 81% quarter on quarter.???
ETFs in Focus
Against this backdrop, below, we highlight a few AI ETFs that should be tracked closely in the coming days. These ETFs lost in the past one month and hence investors can employ the buy-the-dip strategy here.
iShares Robotics and Artificial Intelligence Multisector ETF (IRBO - Free Report) – down 10.2% Past One Month
ROBO Global Robotics & Automation Index ETF (ROBO - Free Report) – down 8.9% Past One Month
Global X Artificial Intelligence & Technology ETF (AIQ - Free Report) – down 3.2% Past One Month
First Trust Nasdaq Artificial Intelligence & Robotics ETF (ROBT - Free Report) – down 9.0% Past One Month