NVIDIA Predicts Revenue Beat, Splits Stock

Nvidia’s forecasted revenue beat and stock split announcement Wednesday drove shares to record highs, satisfying investors buoyed by AI confidence

In extended trading, Nvidia shares increased 5.9% to $1,005, surpassing the psychologically significant $1,000 threshold and adding approximately $140 billion to the company’s market capitalization.

The stock of the AI poster child has increased by 90% thus far in 2018, and a close in Wall Street trading the following day at Wednesday’s after-hours price would set a new record high. 

Effective June 7, the Santa Clara, California-based company announced that its shares would be divided ten-for-one. Additionally, the company announced that it would increase its quarterly dividend by 150%, or 1 cent per share, post-split. 

“NVDA, death, and taxes outweigh earnings.” “The organization once again performed admirably despite enormous expectations,” said Carson Group’s chief market strategist, Ryan Detrick. “The always important data center revenue was strong, while future revenue was also impressive.”

The earnings report from Nvidia, the primary event of the week thus far on Wall Street, could provide additional impetus to a stock market rally that has propelled indexes to all-time highs this year. 

In the wake of Nvidia’s results, rival AI-related chipmakers Advanced Micro Devices (AMD) and Broadcom (AVGO) each saw their respective stock prices increase by 2%. 

Other technology companies, including Alphabet (GOOGL), Microsoft (MSFT), and Amazon.com (AMZN), have been vying for a restricted quantity of Nvidia’s high-end processors in an effort to establish command over AI computing.

CEO Jensen Huang stated on a conference call with analysts that forthcoming Blackwell AI processors from Nvidia will be available for purchase during the current fiscal quarter, with production increasing the following quarter. 

According to Colette Kress, chief financial officer, Blackwell’s chip demand may continue to surpass supply “well into next year.” 

Taiwan Semiconductor Manufacturing (2330.TW), the contract chipmaker for Nvidia, has also been enhancing its advanced packaging capacity, a critical supply-chain limitation for the processors. In April, the Taiwanese firm announced its intention to increase its advanced packaging capacity by over twofold for the current year.

Nvidia projects second-quarter fiscal revenue of $28 billion, with a 2% margin of error. As per LSEG data, analysts had anticipated revenue of $26.66 billion on average. 

Revenue for the first quarter increased by 262 percent annually to $26.04 billion, exceeding street projections of $24.65 billion. The increase in net income was 628 percent, or $14.88 billion. 

“Demand for NVIDIA’s GPU chips remains extremely robust,” said Edward Jones analyst Logan Purk. “These results are likely enough to satiate investors’ appetites, and reassure the market that AI investment has not seen a slowdown yet.” 

Holding a market share of over 80% in the AI processor industry, Nvidia occupies a distinctive position as the primary facilitator and recipient of the rapid advancements in AI technology. 

According to data from FactSet, the company’s largest revenue segment, data centers, generated $22.6 billion in sales for the first quarter ending April 28, surpassing expectations of $21.320 billion. This represents a growth of 427%. 

Meta Platforms (META.O), an open-address tabular entity, is a client of Nvidia. The company raised the midpoint of its capital expenditure forecast for 2024 by approximately $4 billion last month. 

Already prevalent in AI data centers, Nvidia chips are difficult to replace due to their exceptional performance. This advantage is even stronger thanks to its exclusive CUDA software framework, which programmers use to create AI processors.

Analysts do not anticipate that the development of proprietary AI processors by the majority of so-called hyperscalers will significantly impact Nvidia’s market share. 

Nvidia anticipates an adjusted gross margin of 75.5% for the second quarter, within an error of 50 basis points. The average gross margin forecast by analysts is 75.8%. 

In comparison to expectations of 77%, Nvidia disclosed an adjusted gross margin of 78.9% for the first quarter. An ambitious rival, AMD, reported an adjusted profit margin of 52% during the initial quarter of its fiscal year. 

The company earned $6.12 per share in the first quarter, exceeding estimates of $5.59 per share, excluding adjustments.