Nvidia's shares rose 10% after hours on Wednesday as the company predicted a nearly threefold increase in quarterly revenue that is far above projections. The company was banking on the enormous demand for its market-leading artificial intelligence processors.
The company's graphics processing units (GPUs) and data center chips are in high demand right now and will continue to grow as businesses rush to offer more AI solutions. With companies like Microsoft among its clients, Nvidia's silicon controls the worldwide market for AI chips.
According to Investing.com specialist Thomas Monteiro, given the extremely high expectations and the rapidly worsening macro conditions, the market was ready to sell the news after Nvidia's earnings. But the company proved once again that the AI boom is more than simply a stock market story; rather, it's the biggest wager made by businesses globally right now.
The late-day surge in stock prices increased the Santa Clara, California-based company's market value by over $129 billion. It also increased the price of other AI-related businesses, such as Arm Holdings, a chip designer. A total of $160 billion was added to the stock market value by Nvidia and other hardware providers associated with AI computing.
Nvidia predicted 233% sales growth for the first quarter on Wednesday, exceeding the 208% growth predicted by Wall Street.
In 2023, Nvidia revealed quarterly revenue for the first three quarters that exceeded analyst projections by a margin of 10% to 20%.
Some analysts have expressed doubts regarding how long Nvidia can continue to grow at this rate.
For the current quarter, the company projected revenue of $24.0 billion, give or take 2%. Based on LSEG data, analysts had projected revenue of $22.17 billion on average.
According to LSEG data, sales in the data center division, which is its largest by revenue share, increased by 409%, reaching $18.4 billion in the fiscal fourth quarter, above projections of $16.8 billion. Revenue from data centers increased by about 280% in the preceding quarter.
The supply chains of the AI frontrunner, which has struggled to keep up with the rapid demand for Nvidia processors, are also getting better. However, as the company increases output, CEO Jensen Huang informed investors during a conference call following the results that there is no way the business can "reasonably" meet demand in the near future.
Ben Bajarin, the CEO of consultancy firm Creative Strategies, stated that the primary concerns for growth are how supply-constrained they will remain and what the demand will look like in the future.
Analysts predict that in the first half of the year, Taiwan Semiconductor Manufacturing Co., a significant supplier, will see an improvement in its advanced packaging capacity. Through this, Nvidia will be able to free up the major bottleneck and provide consumers with more chips.
Nvidia exceeded analysts' projections of $20.62 billion with fourth-quarter revenue of $22.10 billion. LSEG data shows that fourth-quarter results, adjusted for specific items, were $5.16 per share, versus projections of $4.64 per share.
Nvidia anticipates an adjusted gross margin of 77% for the first quarter, give or take 50 basis points. The average gross margin predicted by analysts is 75.6%. Nvidia's stock has increased by more than 30% so far this year as it competes with Alphabet and Amazon.com for a position among the most valuable firms.
As of February 20, the average daily trading volume of Nvidia shares for the previous 30 sessions was about $30 billion, surpassing the average daily trading volume of $22 billion for Tesla, the manufacturer of electric vehicles.
Despite more stringent trade restrictions with China, one of its biggest customers, the revenue of the AI poster child continues to rise.
In a filing on Wednesday, Nvidia stated that antitrust authorities from China, France, the UK, and the EU had inquired about the company's attempts to distribute GPU supplies and its sales. The company expects more requests from antitrust authorities in the future.
US Commerce Secretary Gina Raimondo revealed in December that the Biden administration is in talks with Nvidia on approved sales of AI technology to China. She said that she had spoken with Huang, the CEO of Nvidia, and that he had made it clear that the company would follow any guidelines the Commerce Department sets down.