Nvidia’s Strong Earnings Beat

Setting the Bar High

Nvidia’s recent earnings made a significant impact, exceeding the high expectations set for the company. Share prices were on the rise after the earnings report as the market gained clarity on some key questions.

Surpassing Expectations

In the fourth quarter, Nvidia not only surpassed revenue and earnings expectations but also provided a guidance for the current quarter that exceeded projections. This exceptional performance pushed Nvidia shares up by 13% in premarket trading, reaching $761.38. The positive momentum also affected other chip stocks, with Advanced Micro Devices rising by 5.5% and Intel by 2.7% in premarket trading.

Clearing Doubts

Supply and Demand Concerns

Prior to the earnings report, there were doubts about whether the demand for Nvidia’s graphics processing units had peaked, especially with reports of reduced waiting times for orders. However, Nvidia’s executives addressed these concerns by stating that supply for their next-generation B100 chip expected later this year will still not meet demand. This reassurance, combined with the growing demand for artificial intelligence, led analysts to predict a bright future for Nvidia.

Future Outlook

Based on the performance and outlook, James Demmert, Chief Investment Officer at Main Street Research, expressed confidence in Nvidia’s potential for further growth. Despite the stock doubling since its 2021 peak, he foresees Nvidia shares reaching $1,000 within the next 12 months.

Minor Setback in China

The only slight negative in the earnings report was a significant drop in Nvidia’s data center revenue from China due to U.S. export controls imposed in October. Surprisingly, even this setback was viewed positively by some analysts.

Nvidia’s strong earnings, impressive guidance, and market momentum indicate a promising future ahead for the company. Nvidia’s Strong Earnings Beat

The recent earnings beat by Nvidia, even without significant sales into China, showcases the company’s potential for further growth. The prospect of shipping chips compliant with U.S. controls hints at even better performance in the future. While China remains a small part of data center sales, there is ample room for expansion.

Analyst Insights

Stifel analyst Ruben Roy noted Nvidia’s solid performance in the Data Center segment, despite reduced sales in China. He maintained a Buy rating on the stock and raised the target price to $910, highlighting the company’s positive outlook for fiscal year 2025.

Dominance in AI Systems

Nvidia’s GPUs have been instrumental in training AI models, leading to its dominance in the market. As demand for inference chips grows, Nvidia is strategically positioning itself for success in this space as well. CEO Jensen Huang revealed that a significant portion of data center revenue already comes from inference, indicating strong potential for growth.

Limited Competitive Risks

With barriers to entry set by its CUDA software stack, Nvidia faces limited competition in dominating the cloud and enterprise workloads. KeyBanc analyst John Vinh raised the target price on Nvidia to $1,100, emphasizing the company’s stronghold in a rapidly expanding market. Maintaining an Overweight rating on the stock, Vinh expressed confidence in Nvidia’s continued success in the years ahead.