Everything you need to know about NVIDIA’s first quarter earnings report
Artificial intelligence (AI) has certainly been a priority lately. It seems like everyone is talking about the progress of AI, myself included, or getting in on the AI development race.
In fact, here’s the latest AI news from just the last week…
- Meta Platforms, Inc. (META) introduced text-to-speech and text-to-speech AI models for over 1,100 languages for its massively multilingual speech (SMS) project.
- Fears over an AI-generated image of the Pentagon on fire sent stocks tumbling for a few minutes on Monday.
- Microsoft CorporationIt is (MSFT) President Brad Smith has expressed support for an agency to regulate how the US government uses AI tools.
- TikTok is testing an AI chatbot named Tako for “new ways to power search and discovery” on the popular app.
- And OpenAI CEO Sam Altman said the company could consider leaving Europe if it finds that upcoming regulations on artificial intelligence by the European Union are over-regulated.
The really big news this week, however, came from NVIDIA Corporation (NVDA).
The semiconductor chip company announced its fiscal 2024 first quarter results on Wednesday…and to put it plainly, folks, NVIDIA reported to extinguish earnings.
So today Market 360, we will review the impressive profits of the company. But let’s dive into NVIDIA’s successes in the AI world first, because its AI success has been key to its strong quarterly results.
A leader in the AI race
As long-time readers know, NVIDIA has long been one of my favorite stocks…
Remember that NVIDIA is a semiconductor that makes high-end graphics processing units (GPUs) used in products like game consoles and personal computers – and chipmakers are key to inventions from the AI…
It’s no surprise, then, that NVIDIA’s GPUs have been in high demand…and are becoming even more so as the AI competition continues.
Last November, NVIDIA announced it was partnering with Microsoft for a multi-year collaboration to build “one of the most powerful AI computers in the world.” Then, in February, the companies announced a 10-year deal to bring Xbox PC games — created and owned by Microsoft — to NVIDIA’s cloud gaming service, GeForce NOW.
Microsoft Gaming CEO Phil Spencer said, “This partnership will help expand NVIDIA’s catalog of titles to include games like Call of Duty, while giving developers more ways to deliver games for streaming.” With this deal, gamers will be able to stream Xbox PC titles from GeForce NOW to PCs, smartphones, smart TVs and other devices.
In April, NVIDIA revealed that Google Cloud would be the first cloud service provider to use NVIDIA’s L4 Tensor Core GPU for AI applications.
The L4 Tensor Core GPU delivers AI video solutions, with over 120 times the AI-powered performance of regular CPUs – and it’s 99% more efficient. Google Cloud management said, “As our customers begin to explore the possibilities of generative AI, we’re proud to bring them NVIDIA’s latest L4 GPU innovation as part of our workload-optimized Compute Engine portfolio. work.”
The company is also at the forefront of helping the development of autonomous vehicles. NVIDIA is helping Mercedes become the leader in autonomous driving with its Level 3 system via NVIDIA chips. The Mercedes system also uses LIDAR (Light Detection and Ranging). Mercedes and NVIDIA are leading the race to develop the safest autonomous driving system. I should add that other automakers – including Jaguar Land Rover, Volvo Cars and Hyundai Motor Group – also use NVIDIA’s chip and AI systems, so its automotive business remains very promising.
NVIDIA Exceeds Q1 Expectations
Given that NVIDIA is a major player in the AI space and the recent AI hype, Wall Street was on pins and needles as to the impact of AI on the company’s business. .
Not only NVIDIA not disappoint, but it shattered analysts’ expectations for its first quarter of fiscal 2024.
First quarter revenue was $7.19 billion. Analysts were only expecting revenue of $6.52 billion, so NVIDIA beat estimates by 10.3%. Data center revenue hit a record $4.28 billion.
The company also reported first-quarter earnings of $1.09 per share, down from $1.36 per share in the same quarter a year ago. Analysts were expecting earnings of $0.92 per share, so NVIDIA posted an 18.5% earnings surprise.
NVIDIA also provided a positive outlook, as it now expects revenue of around $11.0 billion in the second quarter. This compares to revenue of $6.7 billion in the second quarter of FY2023. The consensus outlook estimate called for $7.15 billion, so NVIDIA exceeded outlook estimates of revenue of 53.8%!
Colette Kress, Executive Vice President and Chief Financial Officer of NVIDIA, said, “Generative AI has driven a significant uptick in demand for our products, creating opportunities and global growth at scale in our markets.” (Generative AI is a type of artificial intelligence algorithm that generates new output, like text or an image, based on examples given to it – think ChatGPT. I should also add that “Generative AI was mentioned 43 times during NVIDIA’s conference call.)
Jensen Huang, President and CEO of NVIDIA, said on the company’s earnings call, “Our goal is really to drive the architecture, to partner deeply with creating new markets and new applications we develop and to provide our customers with the flexibilities to run NVIDIA everywhere.
The company’s management also noted that it was seeing a transition in the IT industry, with data center infrastructure shifting globally from general purpose to accelerated computing. The transition is accelerating as more companies seek to apply AI to their business processes, services and products. As a result, NVIDIA has increased its production of data center products to meet growing demand.
NVDA shares jumped more than 24% on Thursday to hit a new all-time high. Its market cap edged closer to $1 trillion (it stood at around $940 billion) – and marked one of the biggest single-day gains in US market history. Never. As of Wednesday, NVIDIA had a market capitalization of around $755 billion. This puts NVIDIA close to the “trillion dollar market cap club”, which includes MicrosoftApple Inc. (AAPL), Amazon.com, Inc. (AMZN), And Alphabet Inc. (GOOG). I have to admit, I don’t think I’ve ever seen a big stock like this go up so quickly.
Looking to the future in the technology sector
I’m proud to say that I recommended NVIDIA to my readers long before all this AI hype. In fact, I added NVIDIA to my Growth investor shopping list back in May 2019. Since then, our position in the stock has now grown almost 800%! We took advantage of the post-earnings rally and took partial profits on the stock yesterday, but I’m holding NVIDIA for the long haul as I expect NVIDIA to continue to dominate the AI sector.
NVIDIA’s success lifted the entire tech sector…as other AI-related tech stocks added nearly $300 billion in market capitalization on Wednesday after a spike in extended trading.
The phrase “a rising tide lifts all boats” fits here, folks, and it also bodes well for the fundamentally superior technology stock I add to my Growth investor shopping list Today. This stock, like NVIDIA, should benefit from the acceleration of AI adaptation.
This company has been at the forefront of technological change, developing many firsts in the industry. Today, it is well known as a global leader in high performance server technology solutions.
I release this new stock – along with three more fundamentally superior companies which are well positioned to profit in various corners of the stock market – in my Growth investor Monthly issue for June today. To make sure you get access to my new recommendations as they become available, join me on Growth investor Today.
Click here for more details.
(If you are already a Growth investor subscriber, I will send you the new monthly issue as soon as it is published today. In the meantime, you can log in here to view your subscription.)
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Publisher hereby declares that as of the date of this e-mail, Publisher owns, directly or indirectly, the following securities which are the subject of commentary, analysis, opinion, advice or recommendations in, or which are otherwise mentioned in, the dissertation below:
NVIDIA Corporation (NVDA), Microsoft Corporation (MSFT), Alphabet Inc. (GOOG), Amazon.com, Inc. (AMZN), And Meta Platforms, Inc. (META)