Nvidia posted a second set of blowout earnings, but the rally in the stock has faltered this time.
NVDA – Daily Chart
NVDA stock is hugging the support from the previous high halfway through Thursday’s US session. That level will need to hold for an extension of the rally.
Nvidia reported strong second-quarter results, beating both earnings and revenue estimates. The company also offered a bullish revenue outlook for the third quarter. The company’s fortunes have changed dramatically this year due to booming artificial intelligence (AI) demand for its GPU chips.
Nvidia shares jumped as high as 10% to a new record high, lifting its market cap to $1.27 trillion. However, the company’s earnings of $13.5 billion came close to analysts’ estimates of close to $12 billion, hinting that analysis is catching up. That could threaten the company’s loft financial valuations.
Earnings per share came in at $2.70, beating estimates of around $2.09 and up over 400% from a year ago. Revenues were 101% higher year-over-year. AI models depend on data centre cloud resources, and Nvidia’s data centre revenue also surged to a record $10.3 billion, while gaming revenues were up 11% to $2.5 billion from a year ago. The company also announced a new share buyback program of $25 billion.
The chipmaker expects revenue of around $16 billion for the third quarter, plus or minus 2%. This was still higher than analysts’ estimates of $12.3 billion. The world’s largest chipmaker is expected to be the beneficiary of the early AI hype. Other chipmakers like AMD are bringing competition, but it will take some time to challenge.
Nvidia CEO Jensen Huang said, “a new computing era has begun.” “Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI.”
“We continue to see significant runway ahead for the company based on its robust competitive position in what is a rapidly growing (yet nascent) AI semiconductor market,” Goldman Sachs analysts said. The company has a $495 price target.
“AMD looks positioned within the market as the potential first viable competitor, but we likely won’t even see initial signs of success until next year. In the meantime, Nvidia will continue to take the lion’s share of the economics from the AI boom,” Barclays said, holding a higher price target of $600.
