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Nvidia’s shares had tripled in value this year so far in Wednesday’s earnings report. (Photo by Justin Sullivan/Getty Images)
NVIDIA
Shares rose on Thursday as analysts welcomed results showing the rise of artificial intelligence is still driving their growth. It also eased concerns about supply constraints and the extent to which Chinese customers are driving demand.
NVIDIA
(ticker: NVDA) shares rose 7.7% to $507.55 in premarket trading on Thursday after its quarterly earnings and outlook were released. well above analyst projections.
Nvidia not only exceeded expectations, but also addressed several concerns about whether its progress is sustainable. The company said it expects product supply to increase in the next fiscal year, easing concerns that it won’t. available to gather Growing demand for AI chips.
“With visibility extending to the 24th, (Nvidia’s) management has qualified additional vendors… and expects to increase supply every quarter through next year to meet demand,” KeyBanc analyst John Vinh wrote. in a research note.
Vinh raised his price target on Nvidia to $670 from $620 and maintained an overweight rating on the stock. The new target is based on an expected price-earnings multiple of 35 times by 2025.
Revenue from China was within the company’s historical range of 20-25%, indicating the pace was not driven by Chinese orders. pulled forward fearing future US restrictions.
UBS analysts noted that Nvidia indicated it may reallocate Chinese shipments of its A800 and H800 chips, which have intentionally limited capacity to comply with US export restrictions, if necessary. They maintained a Buy rating on the shares and raised their price target to $560 from $540.
Nvidia executives told analysts on an earnings conference call that additional restrictions on the export of data center graphics processing units (GPUs) to China would not have an immediate material impact on its financial results, but would result in a long-term loss of opportunity for the TO US
Nvidia was not the only stock to gain from its report, as investors bet AI will fuel growth at other hardware and software companies. chip maker
advanced micro devices
(AMD) rose 2.3% in the premarket, while
Microsoft
(MSFT) gained 1.8% and Google parent
Alphabet
(GOOGL) rose 1.4%.
However, Nvidia’s huge gains suggest it looks like it will remain the market’s favorite bet on AI technology for now.
“Nvidia remains the purest scaling game in AI adoption”
oppenheimers
‘s
Rick Schafer wrote in a research note, while raising his Nvidia price target to $650 from $500 and maintaining an Outperform rating on the stock.
Competition doesn’t seem like an immediate concern. Nvidia executives emphasized the shift toward GPUs to drive artificial intelligence tools and away from general-purpose processors. It is estimated that Nvidia has about a 90% market share for AI-related GPUs today.
“Strong competition is important for a healthy innovation ecosystem. The market should want to see another player and should want to see this next digital transformation boom more pervasive and persistent rather than a bubble of irrational exuberance,” said Daniel Newman, chief executive of technology research firm Futurum Group.
Newman said the Nvidia report showed that there should be opportunities for companies like AMD and
Intel
(INTC) to offer rival AI chip deals. However, he noted that the window for alternatives to grow may be narrowing as Nvidia increases the appeal of its own platform through software development and industry partnerships.
Intel rose 0.1% in premarket trading.
Write to Adam Clark at adam.clark@barrons.com
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