Investors concerned that stock prices may be rising too quickly are reassured by the chip maker’s astounding results and outstanding guidance. Trading in futures points to a successful opening on Thursday.
The stock had been volatile in the days leading up to the company’s fourth-quarter results announcement, which was unexpected given that it had been a dominant player for several months.
In actuality, the shares had fallen by about 11% from November 14 by Wednesday.
Tensions increased. Investors appeared to be more than just concerned that Nvidia, a company that produces expensive chips for use in AI applications, would not meet analyst expectations for its fourth quarter of business. Poor outcomes would trigger a full-scale sell-off due to concerns about the trajectory of stocks in general.
The worries disappear
Nvidia did not let me down. The fact that demand for Nvidia’s AI software and data center processors is increasing is what gave investors cause for celebration.
During the company’s earnings call, CEO Jensen Huang stated that AI is approaching a tipping point due to its capacity to integrate software and processing power to ingest and interpret vast amounts of data.
He stated that the players want to be able to use the data, regardless of the industry. “Demand is surging worldwide across companies, industries and nations.”
Lack of manufacturing capacity to keep up with the rapidly increasing demand is Nvidia’s issue.
According to the corporation, its profits for the fourth quarter increased by 486% year over year and by 28% over the third quarter.
Revenue reached $22 billion, a 265% increase over the previous year.
With $60.9 billion in revenue for the year, it was 126% more than in fiscal 2023.
The advice was just as solid. Revenue for the first quarter of the company’s fiscal year 2025 is expected to reach $24 billion, up 233% from the first quarter of 2024 and up 9% from the fourth quarter.
A gross profit margin of 76.3% to 77% would be realized. The gross margin for the most recent quarter was 76.7%.
After hours, the stock was trading at $736, up over 9% from the previous close of $674.72 and slightly behind the closing high of $739, which was reached on February 14. The shares had gained 49% on the year at that point. As of the closing price on Wednesday, the gain stands at 36.3%. On Thursday, it is expected to climb.
Nvidia surged 239% at the end of 2023 and established itself as a major player in the Magnificent 7 stock group. The other companies are Microsoft, Tesla (TSLA), Apple (AAPL), Amazon.com (AMZN), Alphabet, the parent company of Google (GOOG), Meta Platforms (META), and Microsoft.
(Amazon will become a member of the Dow Jones Industrial Average on Monday, joining Apple and Microsoft.)
Having said that, Nvidia has been an extremely expensive stock recently, with its relative strength index reaching well into the 80s at $739. An overbought stock is indicated by an RSI of more than 70. Nvidia retreated after more than 80 signals that it’s time to sell down.
The rate at which the price of a stock is moving is indicated by its relative strength index.
The performance of the businesses
Nvidia provided data from its four major divisions, beginning with the largest, the data center division.
Data Center: $18 billion in revenue, rising 409% from a year ago and 27% from the third quarter. Revenue increased by 217% to $47.5 billion for the entire year. One-third of this group’s production is anticipated to be purchased by Microsoft and Meta Platforms alone.
Playing games. This is the company that gave Nvidia its beginnings. Revenue: $2.9 billion, up 56% from a year ago and unchanged from the third quarter. Revenue for the entire year: rose 15% to $10.4 billion.
expert visual aid. For the quarter, revenue was $463 million, up 105% over the previous year. Revenue for the entire year was $1.6 billion, up 1%.
Automobiles. At $281 million, sales for the fourth quarter was up 8% from the third quarter but down 4% from the same period last year. Revenue for the entire year surged 21% to $1.1 billion.
It’s concerning about the China issue.
Up to 20% of Nvidia’s output was going to Chinese businesses, but the Biden administration had restricted the licenses to sell the most advanced chip sets to devices in China.
The company stated that the change had an impact on data center sales, but it did not provide an exact amount.
It did imply that sales to China account for less than 10% of total income from data centers.
A large portion of Nvidia’s business is centered around GPUs, or general processing units. The price range for its H100 line units is $30,000 to $40,000.
Blackwell, a new product in the B100 series, is anticipated to be introduced at the company’s Global Technology Conference in March. The H200 units are just going online and will be available at a reduced price.
