Markets breathed a sigh of relief after Nvidia’s long-awaited earnings report beat expectations by a large margin. Revenue rose a staggering 262% year-over-year and the stock price hit an all-time high of $1,017 after the market closed. Driven by massive demand for AI, the chipmaker also announced a ten:1 stock split that may make the shares more accessible to retail investors and will drive the stock price even higher.
“The industry is going through a major transformation,” Nvidia CEO Jensen Huang said in an earnings call on Wednesday. “The next industrial revolution has begun. Companies and countries are working with Nvidia to shift the installed base of data centers worth trillions of dollars to accelerate data processing and build a new type of data centers, AI factories, to produce a new product: artificial intelligence .”
Nvidia stock has been on a tear over the past yr, rising 200% over the past 12 months and 87% because the start of 2024. Its explosive growth has catapulted it to the third-highest market cap on the planet (see above), ahead of peers like Amazon and Meta. “The most important stock on planet Earth” helped lift your entire S&P 500 to an all-time high, in line with Goldman Sachs, and one other earnings surge is a positive indicator that Nvidia has no intention of slowing down anytime soon.
Demand for Nvidia’s electrical circuits, called graphics processing units (GPUs), and data centers has been “incredible,” Huang said. The phenomenon is basically resulting from applications like ChatGPT and GPT-4, along with the growing class of AI startups, which Huang estimates includes between 15,000 and 20,000 firms. That doesn’t include firms focused on self-driving cars, digital character design and biotech firms, he said, which has led to even greater demand from customers.
“We race every day,” Huang said. “Customers are putting a lot of pressure on us to deliver the systems and bring them to market as quickly as possible.”
Last yr, Nvidia had no problem exceeding high expectations: It beat earnings per share estimates by a mean of 20% in comparison with the previous 4 quarters before Wednesday’s release. Ahead of the earnings report, Wall Street’s expectations were high: analysts forecast sales of $24.65 billion. But the $26 billion that Nvidia reported represented a 5.5% increase over Nvidia’s data center revenue, which accounts for the vast majority of its total revenue. They totaled $22.6 billion within the quarter, above Wall Street’s estimate of $21.13 billion and 427% greater than this time last yr. Nvidia’s share price rose as much as 4.4% in aftermarket trading following the earnings release, crossing the $1,000 threshold for the primary time on the earnings release.
“If 10 is a shockingly good one [result] On the upside, I would give seven or eight,” said Paul Meeks, tech investor and finance professor at The Citadel Assets.
Although Nvidia’s 10-for-1 stock split doesn’t have a right away impact on the corporate’s valuation, Meeks says it’s a wise move to make the shares cheaper and more accessible to retail investors. Nvidia stock is currently trading around $950, meaning investors will likely have the opportunity to snap up shares for under $100 after the stock split on June 7.
“Stock splits are cosmetic… But when you push the stock price down to about $100 a share and everyone on Earth knows that this is the leading tech stock… I think there are probably some retail investors who can’t wait to buy it now.” to purchase,” Meeks said. “Overall, it’s definitely positive.”
The reason for Nvidia’s dominance is its huge lead within the AI hardware market. Nvidia pioneered the event of GPUs, special computer chips that were initially used for gaming but then focused on the AI developer market because the AI sector exploded.
Nvidia’s hardware game is backed by heavy investment in software: The CUDA programming interface, which runs exclusively on its chips, is vital for a lot of AI developers and a key reason the corporate has been in a position to defend its near-monopoly within the AI space.
Nvidia’s rise has been fueled by relentless demand: The company has been forced to choose and select who gets chips first as everyone from data center operators to startups and Big Tech race to get their hands on AI computing power, especially its top-of-the-line Blackwell and H200 chips, which the corporate said are expected to start shipping next quarter.
“Blackwell is in full production…Demand for H200 and Blackwell is significantly outpacing supply, and we expect demand to continue to outstrip supply well into last year,” Nvidia CFO Colette Kress said in a press release Earnings conference call.
“We will see a lot of Blackwell earnings this year,” Huang added. And: “After Blackwell, there is another chip.”
Nvidia’s business outside of AI chip development was relatively marginal. The company’s gaming division, once its core business, posted revenue of $2.6 billion, down 8 percent from last quarter. The automotive division posted gains, with revenue of $329 million, but Nvidia’s other businesses paled as compared to its investments in AI chipmaking.
However, because the starting of this yr, Nvidia’s competitors have been increasing competition within the AI hardware space. Intel, which has $8.5 billion in CHIPS Act funding, last month released its Gaudi 3 AI chip that may compete with Nvidia’s top-of-the-line Blackwell. Big Tech’s AI developers, including Google and Microsoft, have announced they’re developing their very own AI chips in-house to scale back their dependence on Nvidia and reduce costs.
“This combination of some big companies saying, ‘We’re going to develop our own AI chips,’ and other industries saying, ‘We’re going to do it locally on our smaller devices, for less power consumption’ – that could hinder their growth in the long run,” said Edward Wilford, an analyst at technology consulting firm Omdia Assets.
Nvidia’s business model will not be fully vertically integrated: As a chip designer, the corporate creates models for semiconductors, but subcontracts the actual manufacturing of its most advanced chips to TSMC, the Taiwanese giant that makes over 90% of the world’s most advanced chips. Frosty U.S.-China relations and a recent earthquake in Taiwan that temporarily shut down TSMC’s headquarters have made some Nvidia investors nervous — any significant disruption to TSMC’s operations can be a serious blow to your entire semiconductor supply chain.
“They are very aware of how vulnerable they are to TSMC and supply disruptions. They’ll be watching this closely,” Wilford said. “This is a business that you can’t just move from one area to another…You want to make sure it’s protected at all costs. This will give some people sleepless nights.”
