Nvidia Is At The Door Of The $1 Trillion Club

On Wednesday, Nvidia Corporation NVDA shares soared 26% upon strong first quarter results and AI-powered guidance that both shattered expectations, bringing its market value at close to $755 billion. On Thursday during premarket trading, they surged even 29%, bringing the company’s market value to $980 billion and the chipmaker very close to joining, Apple Inc AAPL, Microsoft Corporation MSFT and Amazon.com AMZN in the $1 trillion club. 

First Quarter Figures

Total sales did drop 13% from last year’s comparable quarter when they amounted to $8.29 billion. But revenue of $7.19 billion still topped the expected $6.52 billion.

With surged demand for its data center offerings, the graphics chip specialist saw the unit’s revenue rise 14% YoY to $4.28 billion, leaving expectations of $3.9 billion far behind. This positive demand trend is owed to Nvidia’s GPU chips that large internet and cloud companies needed to train and deploy generative AI applications, like the one from Microsoft, OpenAI’s ChatGPT. Even Apple is betting big on this front as on Tuesday, it revealed has partnered with Broadcom in a multibillion-dollar deal to develop chips made in the U.S.

On the other hand, Nvidia’s gaming division experienced a 38% YoY drop in revenue to $2.24 billion, but still topped expectations of $1.98 billion. However, it is important to note that gaming revenue did jump 22% from the prior quarter with the PC market still being in a slump. But, this segment remains as hot as ever, with even the tech titan Microsoft wanting to become a gaming powerhouse by committing $70 billion as it hopes to buy Activision Blizzard Inc ATVI. 

The automotive division remains a small part of Nvidia’s business with sales lower than $300 million, but with a YoY growth of 114%.  

Net income amounted to $2.04 billion, or 82 cents a share, rising significantly from last year’s comparable quarter when it amounted to $1.62 billion, or 64 cents. 

AI-Powered Q2 guidance

Management is expecting revenue to grow 64% YoY to $11 billion. Although adjusted EPS were not provided, based on the given inputs, Motley Fool found they are expected to consequently skyrocket 286% to $1.97 a share. Microsoft who is leading the AI front for now is also betting big on this technology to fuel its revenue growth, but over the long-term as the tech titan gave a downbeat outlook due to slowed down cloud demand, a concern that it shares with its cloud peer, Amazon.

As it goes for the Moon, Nvidia already reached the stars

Given the challenging macroenvironment that caused even Amazon to be cautious and Microsoft to provide lackluster guidance, Nvidia not only did extremely well considering the circumstances by recording record revenue but also managed to give an exhilarating outlook. Nvidia already had good prospects based on gaming and cloud computing, but with generative AI, it’s long-term potential reached a whole new level. At a recent Goldman Sachs and SV Angel event on artificial intelligence, Bill Gates claimed that the power of this technology is so profound that could lead to people never needing to use Google or visit a website go shop like Amazon anymore. CEO Jensen Huang certainly thinks the Nvidia is in all the right places, with shares having more than doubled this year. 

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.