Nvidia stock is rising on solid earnings

Immediately after the report was published, the company’s shares increased by 4.5% in after-hours trading.

This is breaking news. Read the Nvidia earnings preview below and check back for more analysis soon.

Nvidia’s April quarter results, which will be released late Wednesday, are sure to impress. Savor them, because this could be the last insanely great Nvidia earnings comparison for a while.

That’s because the April 2023 quarter was Nvidia’s last period of flat sales before demand for artificial intelligence chips surged and caused the company’s market capitalization to quadruple to $2.4 trillion.

A rough pattern seems to work. Nvidia’s AI architecture doubles computing power every six months. The latest accelerator design, unveiled in March by CEO Jensen Huang, can run through the toughest AI training sets four times faster than current Nvidia chips.

Analysts expect sales to nearly quadruple to $24.6 billion in the April 2024 quarter, with earnings rising fivefold to $5.60 per share. The company’s guidance projected sales of $23.5 billion to $24.5 billion.

So Nvidia’s business scales according to the power of its chips. Not surprisingly, the company’s stock closed at a record high of $953.86 on Tuesday.

Nvidia shares fell 1.9% to $939.23 on Wednesday. According to Susquehanna analysts, options trading implies about a 10% move in either direction after the report, with relatively balanced demand for bets on moves up or down.

The quarterly results are the first since Nvidia introduced its Blackwell accelerator architecture at a developer conference in March. These chips won’t ship in large quantities until later this year, so the April report will reflect still strong demand for Nvidia’s current chip, known as Hopper. Analysts will listen to how the company manages to increase production of the Hopper product and reduce delivery times to customers.

Currently, over 80% of Nvidia’s sales go to cloud data centers. In 2023, big buyers were Microsoft and the meta platforms owned by Facebook.

Amazon.com has made some big purchases this year. Oppenheimer analyst Rick Schafer believes data center sales rose more than 400% in April.

Artificial intelligence infrastructure competition is furious between Microsoft, Amazon and Alphabet’s Google unit
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and others. Therefore, Wall Street is confident that demand for Hopper products will not decline while Nvidia and its customers switch to the new Blackwell architecture. Investors will be waiting for confirmation of that information when Huang and his colleagues discuss their forecasts on Wednesday.

With such a steep trajectory, Nvidia tends to only give guidance a quarter of an hour ahead. The Wall Street consensus forecast for July revenue is $26.6 billion. That would be a nice doubling from the previous year, but less than the 3.5-fold increase that analysts expect to hear in the April quarter.

Even if Nvidia’s climb becomes a little less steep over the next few quarters, its lead over AI acceleration rivals looks assured.

“Nvidia’s products are unmatched this year and next,” Baird analyst Tristan Gerra wrote in a note Monday in which he raised his price target from $1,050 to $1,200.

Write to Bill Alpert at [email protected]