Nvidia Stock Goes Parabolic After Chipmaker Reports Q1 Beat: AI Momentum Pushes Data Center Revenue To Record

Nvidia Corp. NVDA reported first-quarter results that came in well ahead of Street expectations Wednesday as the chipmaker rides artificial intelligence momentum. The company issued an upbeat outlook on surging demand for its data center products.

The stock’s after-hours gain has added over $150 billion to Nvidia’s market cap.

Nvidia’s Key Q1 Numbers: Santa Clara, California-based Nvidia’s first-quarter earnings came in at $1.09 per share, ahead of the consensus estimate of 92 cents per share.

First-quarter revenue came in at $7.19 billion, also exceeding the Street estimate of $6.52 billion. In late February, Nvidia guided to revenue of $6.5 billion plus or minus 2%, which translates to a range of $6.37 billion to $6.63 billion.

Here’s how the headline numbers compare to the year-ago and preceding quarters.

	Q1’24	Year-over-Year Change	Quarter-over-Quarter Change
Revenue	$7.19B	-13.3%	+18.84%
Earnings per share	$1.09	-19.9%	+23.86%
Non-GAAP gross margin	68.8%	-0.3 pp	+0.7 pp

Ahead of the quarterly results, Raymond James analyst Srini Pajjuri said he expected Nvidia to report slightly better than expected results.

In the first quarter, Nvidia returned $99 million in cash dividends to shareholders. The company said it will pay its next quarterly cash dividend of 4 cents per share on June 30, 2023 to all shareholders of record as of June 8.

Nvidia's Business Segments: Nvidia’s data center business, which includes its AI chips, ringed in record revenue of $4.28 billion. The AI chips are widely used in training large language models and also for running machine learning software.

“The computer industry is going through two simultaneous transitions — accelerated computing and generative AI," said Jensen Huang, founder and CEO of Nvidia.

“A trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process.”

How Nvidia’s Major Business Segments Fared

	Revenue	Year-over-Year Change	Quarter-over-Quarter Change
Data center	$4.28B	+14.2%	+18.5%
Gaming	$2.24B	-38.1%	+22.3%
Prof. visualization	$295M	-52.6%	+30.5%
Automotive	$296M	294	+114.5%

KeyBanc Capital Market analyst John Vinh anticipated a modest miss for the gaming business due to the disappointing launch of the RTX4070. He also suggested supply will likely limit more meaningful near-term upside for data center GPUs, including A100 and H100.

Profession visualization and autos contributed $226 million and $294 million, respectively in the fourth quarter. The latter saw a 135% year-over-year jump and a more modest 17% sequential increase, as demand from the vertical increased amid the increasing adoption of autonomous driving assistance systems.

See Also: How To Buy Nvidia (NVDA) Stock

Nvidia's Forward Outlook: For the current quarter, Nvidia expects revenue of $11 billion, plus or minus 2%. This compares to the consensus of $7.15 billion. The company guided to second-quarter non-GAAP gross margin of 70%, plus or minus 50 basis points.

Analyst, on average, estimate EPS to jump 100% year-over-year to $1.06, benefiting from an easier comparison with the year-ago period.

CEO Huang said, "Our entire data center family of products — H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand and BlueField-3 DPU — is in production. We are significantly increasing our supply to meet surging demand for them.”

The sell-side is optimistic about the near term. KeyBanc's Vinh said Nvidia has dominant positioning in generative artificial intelligence and will also benefit from multiple new product cycles across both data center and gaming.

Pajjuri shares a similar view. "Generative AI demand is booming and H100 product ramps are in early stages, which should more than offset slower Cloud capex spending," he said.

The analyst sees the DGX Cloud, which is AI-training-as-a-service, as another incremental driver but expects the near-term contribution to be modest.  He is bullish on the company's AI/ML dominance, new product cycles, auto inflection and emerging software/services opportunity.

As CEO Huang and his team prepare to elaborate on the quarterly performance on the earnings call, investors will likely look ahead for more clarity on the inflection in gaming revenue, the impact of the geopolitical tensions between China and the U.S. and the AI opportunity.

Nvidia Price Action: Nvidia is the best-performing S&P 500 stock this year, having gained about 110% for the year-to-date period.

The stock's valuation could cause uneasiness among traders, as it trades at a forward P/E multiple of 63.29 compared to the average P/E of 24.7 for the tech sector.

The average price target for Nvidia stock, based on data compiled by TipRanks, is $307.37, which suggests a fractional upside from current levels. Out of the 33 analysts rating the stock, 26 have Buy ratings and seven have a Neutral stance toward the stock.

Nvidia, which settled Wednesday’s session down 0.49% at $305.38, rose 19.4% to $364.63 in after-hours trading, according to Benzinga Pro data.

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