Nvidia Shares Rebound

Nvidia (NVDA) shares rebounded into positive territory Thursday after the semiconductor titan unveiled a fiscal second-quarter earnings report that handily beat analyst expectations.

The initial market reaction saw shares of the AI chip behemoth dip slightly despite the strong results, showcasing the high bar investors have set for the company.

Nvidia reported a 56% surge in sales for the quarter, reaching $46.74 billion, closely aligning with Wall Street’s consensus estimate of $46.06 billion, according to LSEG data. Adjusted earnings per share (EPS) clocked in at $1.05, marginally exceeding the $1.01 per share anticipated by analysts.

However, a closer look reveals that data center revenue, a closely watched metric, registered $41.1 billion, falling short of expectations for the second consecutive quarter. Despite this slight miss, data center revenue still demonstrated robust growth of 56% year-over-year, underscoring the continued demand for Nvidia’s AI-focused hardware.

Looking ahead, Nvidia is guiding for revenue of $54 billion, plus or minus 2%, for the current quarter. It’s important to note that this forecast doesn’t factor in potential H20 shipments to China, adding a layer of complexity to the outlook. The Street, according to LSEG, was projecting revenue of $53.1 billion.

During the investor conference call, CEO Jensen Huang painted a bullish picture of the long-term prospects for AI, stating that the technology has made “tremendous progress” in the last year and emphasized that the build-out of AI infrastructure is still in its nascent stages.

“As the AI revolution went into full steam, as the AI race is now on, the capex spend has doubled to $600 billion per year,” Huang elaborated. “There’s five years between now and the end of the decade, and $600 billion only represents the top four hyperscalers.”

Huang boldly projected that AI infrastructure spending could reach a staggering $3 trillion to $4 trillion by the close of the decade, signaling the scale of the opportunity Nvidia sees ahead.

“The opportunity ahead is immense,” he declared.

While Benchmark analysts acknowledged in a Thursday note that Nvidia’s guidance represented “only modest upside to an elevated Street consensus,” they were overall positive, emphasizing the report demonstrated “solid sequential and annual growth.”

“We believe Nvidia’s results are consistent with its previous objectives and are in no way indicative of a slowdown in industry-wide AI interest or investments,” the analysts wrote, reiterating their “buy” rating on the stock.