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NVIDIA's Q4 Earnings Indicate That AI Boom is Here to Stay
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Technology stocks rallied in 2023, supported by the artificial intelligence (AI) frenzy. The momentum continues in early 2024. However, a section of technical and financial experts has warned that the AI space is much hyped and likely to form a bubble.
It goes without saying that market participants were eagerly waiting for the quarterly financial numbers of AI-chip giant NVIDIA Corp. (NVDA - Free Report) . On Feb 21, after the closing bell, the company reported blockbuster fourth-quarter fiscal 2024 earnings. Moreover, its robust guidance indicates that the AI boom will continue for a long time.
The AI market has gathered pace in the past few years, buoyed by the rapid penetration of digital technologies and the Internet. Importantly, COVID-19 acted as a major catalyst. Social distancing and lockdowns were the key features of the pandemic-ridden period between 2020 and 2022. People across the world had no option but to rely on the Internet and digitization for survival.
This enormous opportunity compelled technology behemoths to invest significantly in R&D activities, especially in the high-end AI space. This space received tremendous demand from end-use verticals like automotive, healthcare, banking and finance, manufacturing, food and beverages, logistics, and retail to name a few.
The strong results of NVIDIA in the recently reported quarter confirm this trend. Quarterly adjusted earnings of $5.16 per share, surpassed the Zacks Consensus Estimate of $4.55 per share and exceeded the year-ago period earnings of $0.88 per share.
NVIDIA posted revenues of $22.1 billion for the quarter, outpacing the Zacks Consensus Estimate by 3%. This compares favorably with the year-ago revenues of $6.1 billion. NVIDIA reported these robust financial numbers despite a stiff decline in its business in the key market of China. The U.S. government has banned exports of high-end AI-based NVIDIA chips in China for security reasons.
What is most important is the guidance issued by management. Even after executing this tremendous success, CEO Jensen Huang said, “Fundamentally, the conditions are excellent for continued growth in 2025 and beyond.” “Strong demand was driven by enterprise software and consumer internet applications, and multiple industry verticals including automotive, financial services and health care.”
NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. Over the years, this worldwide leader of the GPU chipset has shifted its focus from PC graphics to AI-based solutions that support high-performance computing, gaming, and virtual reality platforms.
At present, NVIDIA is the largest global manufacturer of generative AI chipsets, The company's A100 and H100 AI chips are used to build and run AI applications, including OpenAI's ChatGPT.
In the near future, NVIDIA is expected to benefit in two ways. Demand for its Hopper chips like H100 and next-generation B100 remains strong owing to the significant adoption of generative AI and an industry-wide shift away from central processors to NVIDIA-made accelerators.
On the other hand, despite an improving supply of NVIDIA chipsets, demand is likely to far outpace supply, resulting in price hikes of chips. This prompted management to provide a rosy revenue guidance of $24 billion for the current quarter, way ahead of the current consensus estimate of $21.56 billion.
The market for AI is expected to show strong growth in the coming decade. Its current size of $200-$300 billion is expected to grow to nearly $2 trillion by 2030, as estimated by several research agencies.
NVIDIA’s stock price has soared 232% in the past year. Despite this, following the fourth-quarter fiscal 2024 results, the stock price jumped 16.4% on Feb 22. This momentum is likely to continue as NVIDIA currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Moreover, the earnings of NVIDIA drove the entire semiconductor space. Stock prices of Advanced Micro Devices Inc. (AMD - Free Report) , Taiwan Semiconductor Manufacturing Co. Ltd. (TSM - Free Report) , Broadcom Inc. (AVGO - Free Report) and QUALCOMM Inc. (QCOM - Free Report) have advanced 10.7%, 3%, 6.3% and 1.8%, respectively.
The chart below shows the price performance of the five abovementioned stocks year to date.
Image Source: Zacks Investment Research
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NVIDIA's Q4 Earnings Indicate That AI Boom is Here to Stay
Technology stocks rallied in 2023, supported by the artificial intelligence (AI) frenzy. The momentum continues in early 2024. However, a section of technical and financial experts has warned that the AI space is much hyped and likely to form a bubble.
It goes without saying that market participants were eagerly waiting for the quarterly financial numbers of AI-chip giant NVIDIA Corp. (NVDA - Free Report) . On Feb 21, after the closing bell, the company reported blockbuster fourth-quarter fiscal 2024 earnings. Moreover, its robust guidance indicates that the AI boom will continue for a long time.
The AI market has gathered pace in the past few years, buoyed by the rapid penetration of digital technologies and the Internet. Importantly, COVID-19 acted as a major catalyst. Social distancing and lockdowns were the key features of the pandemic-ridden period between 2020 and 2022. People across the world had no option but to rely on the Internet and digitization for survival.
This enormous opportunity compelled technology behemoths to invest significantly in R&D activities, especially in the high-end AI space. This space received tremendous demand from end-use verticals like automotive, healthcare, banking and finance, manufacturing, food and beverages, logistics, and retail to name a few.
The strong results of NVIDIA in the recently reported quarter confirm this trend. Quarterly adjusted earnings of $5.16 per share, surpassed the Zacks Consensus Estimate of $4.55 per share and exceeded the year-ago period earnings of $0.88 per share.
NVIDIA posted revenues of $22.1 billion for the quarter, outpacing the Zacks Consensus Estimate by 3%. This compares favorably with the year-ago revenues of $6.1 billion. NVIDIA reported these robust financial numbers despite a stiff decline in its business in the key market of China. The U.S. government has banned exports of high-end AI-based NVIDIA chips in China for security reasons.
What is most important is the guidance issued by management. Even after executing this tremendous success, CEO Jensen Huang said, “Fundamentally, the conditions are excellent for continued growth in 2025 and beyond.” “Strong demand was driven by enterprise software and consumer internet applications, and multiple industry verticals including automotive, financial services and health care.”
NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. Over the years, this worldwide leader of the GPU chipset has shifted its focus from PC graphics to AI-based solutions that support high-performance computing, gaming, and virtual reality platforms.
At present, NVIDIA is the largest global manufacturer of generative AI chipsets, The company's A100 and H100 AI chips are used to build and run AI applications, including OpenAI's ChatGPT.
In the near future, NVIDIA is expected to benefit in two ways. Demand for its Hopper chips like H100 and next-generation B100 remains strong owing to the significant adoption of generative AI and an industry-wide shift away from central processors to NVIDIA-made accelerators.
On the other hand, despite an improving supply of NVIDIA chipsets, demand is likely to far outpace supply, resulting in price hikes of chips. This prompted management to provide a rosy revenue guidance of $24 billion for the current quarter, way ahead of the current consensus estimate of $21.56 billion.
The market for AI is expected to show strong growth in the coming decade. Its current size of $200-$300 billion is expected to grow to nearly $2 trillion by 2030, as estimated by several research agencies.
NVIDIA’s stock price has soared 232% in the past year. Despite this, following the fourth-quarter fiscal 2024 results, the stock price jumped 16.4% on Feb 22. This momentum is likely to continue as NVIDIA currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Moreover, the earnings of NVIDIA drove the entire semiconductor space. Stock prices of Advanced Micro Devices Inc. (AMD - Free Report) , Taiwan Semiconductor Manufacturing Co. Ltd. (TSM - Free Report) , Broadcom Inc. (AVGO - Free Report) and QUALCOMM Inc. (QCOM - Free Report) have advanced 10.7%, 3%, 6.3% and 1.8%, respectively.
The chart below shows the price performance of the five abovementioned stocks year to date.
Image Source: Zacks Investment Research