Nvidia (NVDA) is experiencing a notable surge in its stock value as its latest earnings report quelled worries surrounding supply constraints and the driving force behind demand. The tech giant’s embrace of the artificial intelligence (AI) boom continues to fuel its growth, and the recent earnings announcement provided clarity on various concerns.
The surge in Nvidia’s stock price, up by 7.7% to $507.55 in premarket trading on Thursday, came in response to quarterly earnings that significantly surpassed analysts’ projections and a robust outlook for the company’s future performance.
The company not only exceeded expectations but also addressed uncertainties about the sustainability of its growth trajectory. Nvidia assured investors that it anticipates an increase in product supply in the upcoming fiscal year, assuaging fears that it might struggle to meet the escalating demand for AI chips.
John Vinh, an analyst at KeyBanc, remarked, “With visibility extending into ’24, [Nvidia] management has qualified additional suppliers…and expects to increase supply each quarter through next year to meet demand.” As a result, Vinh raised his target price for Nvidia to $670 from $620 and maintained an Overweight rating on the stock.
Furthermore, Nvidia’s revenue from China remained within the historical range of 20% to 25%, indicating that the strong performance wasn’t solely driven by Chinese orders being accelerated to circumvent potential future U.S. restrictions.
UBS analysts highlighted Nvidia’s flexibility in reallocating shipments of certain chips to China based on export restrictions. They raised their target price for Nvidia to $560 from $540 and maintained a Buy rating on the stock.
Nvidia executives emphasized during an earnings call that additional export restrictions on data center graphics-processing units (GPUs) to China would not immediately impact financial results but could result in a long-term missed opportunity for the U.S.
The positive impact of Nvidia’s report wasn’t confined to its own stock, as investors also anticipated AI-powered growth for other hardware and software companies. Advanced Micro Devices (AMD) gained 2.3%, Microsoft (MSFT) rose 1.8%, and Google-parent Alphabet (GOOGL) increased by 1.4% in premarket trading.
Despite the overall market movement, Nvidia’s significant gains suggest it will likely remain the top choice for investors seeking exposure to AI technology.
According to Rick Schafer from Oppenheimer, “Nvidia remains the purest scale play on AI adoption.” Schafer increased his target price for Nvidia to $650 from $500 and maintained an Outperform rating on the stock.
While competition is valuable for fostering innovation, Nvidia executives highlighted the growing prominence of GPUs in powering AI tools. Currently holding an estimated 90% market share for AI-related GPUs, Nvidia is well-positioned to leverage its dominant position in the market.
Daniel Newman, CEO of Futurum Group, emphasized that while there should be room for competitors like AMD and Intel to introduce rival AI chip offerings, Nvidia’s strategic focus on software development and industry partnerships is enhancing its platform’s appeal. This strategy could narrow the window of opportunity for alternatives to thrive.
As for Intel (INTC), the tech giant experienced a slight uptick of 0.1% in premarket trading.
