NVIDIA's Blowout Quarter: 'Machine Learning Is Like A Quicksand'

NVIDIA Corporation NVDA delivered a massive earnings beat, with strength across its key growth businesses.

"Machine Learning is like a quicksand, once a company decides to embark on the Intelligent Apps…there is no turning back," Global Equities Research's Trip Chowdhry said in a report.

Chowdhry maintained an Overweight rating on Nvidia, with a 12-18 month price target of $85.

The company reported its Q3 revenue at $2 billion, representing 54 percent year-over-year growth, beating the consensus estimate of $1.69 billion. EPS came in at $0.94, significantly ahead of the consensus expectation of $0.57. Nvidia also raised its revenue guidance to $2.1 billion.

GPU Prospects

Datacenter business revenues surged $193 percent to $240 million. This supports Chowdhry’s commented on October 29 related to companies like Apple Inc. AAPL, Facebook Inc FB, Microsoft Corporation MSFT and Amazon.com, Inc’s AMZN AWS growing their Nvidia GPU compute capacity by more than 100 percent year-over-year.

Investments in the company’s GPUs has continued to increase, the analyst noted. Apple's GPU compute budget for the back half of 2016 is 250 percent more than Apple's GPU compute budget for the first half. All these are running on Nvidia’s GPUs and using CUDA libraries.

“Apple is heavily using RNN (Recurrent Neural Network) and CNN (Concurrent Neural Network) DL Models and is using TensorFlow…Apple has been running more than 2,000 commercial grade Training Models, which are related to multiple domains like Education, Weather, Agriculture, Healthcare, Security, Image recognition, Voice recognition, Entertainment, Sports, Transportation and Manufacturing,” Chowdhry wrote.

In a report published on November 7, Canaccord Genuity’s Matthew Ramsay commented that the Pascal GPU would likely drive meaningful upside for Nvidia, higher than the consensus expectations for the October and January quarters.