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Shares of AI bellwether Nvidia jumped about 8.5% in premarket trading on Thursday, lifting tech shares about the world, after the company forecast quarterly revenue that smashed expectations and announced a $25bn buyback plan.
The results, reported late on Wednesday, signalled that Wall Street’s artificial intelligence (AI) rally still has legs. Nvidia shares rose to $511.30 in premarket trading, set to surpass a record high it hit earlier this week and add $99bn to its market cap.
Nvidia CEO Jensen Huang said he expects the AI boom will last well into next year and made what could be the largest single bet yet in the tech sector to back up his optimism.
The company’s sales forecast on Wednesday blew past Wall Street’s expectations and it said it would buy back another $25bn of its shares, a move most companies make when their leadership thinks the company is undervalued. Nvidia’s stock price, though, has more than tripled this year and was set to hit an all-time high.
Nvidia said it plans to ramp up production of its hardware into next year, quashing doubts that a few analysts had raised about how long the AI craze could last. The company has a near-monopoly on the computing systems used to power services like ChatGPT, OpenAI’s blockbuster generative AI chatbot.
“We have excellent visibility through the year and into next year, and we're already planning the next generation infrastructure with leading (cloud computing firms) and data centre builders,” Huang told investors on a conference call on Wednesday.
Demand for the chips has given Nvidia the cash for the investor payday. The company reported its adjusted gross margins nearly doubled to 71.2% in its second quarter, when most semiconductor companies have gross margins between 50% and 60%. It also said it expects $16bn of sales in the current quarter, again coming in far above analysts’ projection of $12.6bn.
Earlier this year, Nvidia became the first trillion-dollar chip firm. “Bears will be arguing that at some point, the valuation will start to appear full. Luckily for Nvidia, a cursory glance would suggest there aren’t many bears about,” said Hargreaves Lansdown analyst Sophie Lund-Yates.
More than 20 brokerages raised their target price on Nvidia after the earnings, according to Refinitiv data, with Elazar Advisors being the most bullish at $1,600, representing a threefold increase in the stock’s value from current levels.
Rosenblatt Securities' target of $1,100 is the other one above $1,000, according to Refinitiv data. Median analyst price target on the stock nearly doubled to $600 since May when the company's forecast for a 50% jump in second-quarter revenue sent its shares soaring.
“There’s already a lot of good news baked into the price and that good news needs to keep coming,” said Dan Boardman-Weston, CEO at BRI Wealth Management.
The stock trades at about 39 times the consensus earnings for the next 12 months, cheaper than its forward price-to-earnings ratio of 80 in May, Refinitiv data showed.
Bernstein analysts expect Nvidia stock to become cheaper than it was before it reported results due to “the magnitude of earnings revisions”.
Nvidia’s results are also keeping a Wall Street rally alive, with futures tracking the tech-heavy Nasdaq 100 jumping more than 1%, while S&P 500 futures rose 0.5%.
“Nvidia news has a boosting effect on technology stocks, if only by confirming that all the talk about the AI-craze was not empty, after all,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Shares of AI-related chip stocks including Nvidia rival Advanced Micro Devices, Micron Technology, Broadcom and Marvell Technology rose between 2.2% and 4.3% in premarket trading.
US-listed shares of Taiwan Semiconductor Manufacturing Company (TSMC), which supplies to Nvidia, rose 3.2%.
European chip companies also rose and Asia shares rallied after tech darling Nvidia’s results.
A lot rested on Nvidia posting strong results, as most of the S&P 500's over 15% year-to-date gains have come from the AI-driven rally in Nvidia and other Big Tech stocks.
Investing.com analyst Thomas Monteiro said Nvidia’s results validated “the narrative that has been propping tech stocks in general this year”.
Reuters
Nvidia CEO Jensen Huang. Picture: I-HWAS CHENG/BLOOMBERG
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Nvidia’s sizzling stock rally juices tech sector
Shares of AI bellwether Nvidia jumped about 8.5% in premarket trading on Thursday, lifting tech shares about the world, after the company forecast quarterly revenue that smashed expectations and announced a $25bn buyback plan.
The results, reported late on Wednesday, signalled that Wall Street’s artificial intelligence (AI) rally still has legs. Nvidia shares rose to $511.30 in premarket trading, set to surpass a record high it hit earlier this week and add $99bn to its market cap.
Nvidia CEO Jensen Huang said he expects the AI boom will last well into next year and made what could be the largest single bet yet in the tech sector to back up his optimism.
The company’s sales forecast on Wednesday blew past Wall Street’s expectations and it said it would buy back another $25bn of its shares, a move most companies make when their leadership thinks the company is undervalued. Nvidia’s stock price, though, has more than tripled this year and was set to hit an all-time high.
Nvidia said it plans to ramp up production of its hardware into next year, quashing doubts that a few analysts had raised about how long the AI craze could last. The company has a near-monopoly on the computing systems used to power services like ChatGPT, OpenAI’s blockbuster generative AI chatbot.
“We have excellent visibility through the year and into next year, and we're already planning the next generation infrastructure with leading (cloud computing firms) and data centre builders,” Huang told investors on a conference call on Wednesday.
Demand for the chips has given Nvidia the cash for the investor payday. The company reported its adjusted gross margins nearly doubled to 71.2% in its second quarter, when most semiconductor companies have gross margins between 50% and 60%. It also said it expects $16bn of sales in the current quarter, again coming in far above analysts’ projection of $12.6bn.
Earlier this year, Nvidia became the first trillion-dollar chip firm. “Bears will be arguing that at some point, the valuation will start to appear full. Luckily for Nvidia, a cursory glance would suggest there aren’t many bears about,” said Hargreaves Lansdown analyst Sophie Lund-Yates.
More than 20 brokerages raised their target price on Nvidia after the earnings, according to Refinitiv data, with Elazar Advisors being the most bullish at $1,600, representing a threefold increase in the stock’s value from current levels.
Rosenblatt Securities' target of $1,100 is the other one above $1,000, according to Refinitiv data. Median analyst price target on the stock nearly doubled to $600 since May when the company's forecast for a 50% jump in second-quarter revenue sent its shares soaring.
“There’s already a lot of good news baked into the price and that good news needs to keep coming,” said Dan Boardman-Weston, CEO at BRI Wealth Management.
The stock trades at about 39 times the consensus earnings for the next 12 months, cheaper than its forward price-to-earnings ratio of 80 in May, Refinitiv data showed.
Bernstein analysts expect Nvidia stock to become cheaper than it was before it reported results due to “the magnitude of earnings revisions”.
Nvidia’s results are also keeping a Wall Street rally alive, with futures tracking the tech-heavy Nasdaq 100 jumping more than 1%, while S&P 500 futures rose 0.5%.
“Nvidia news has a boosting effect on technology stocks, if only by confirming that all the talk about the AI-craze was not empty, after all,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Shares of AI-related chip stocks including Nvidia rival Advanced Micro Devices, Micron Technology, Broadcom and Marvell Technology rose between 2.2% and 4.3% in premarket trading.
US-listed shares of Taiwan Semiconductor Manufacturing Company (TSMC), which supplies to Nvidia, rose 3.2%.
European chip companies also rose and Asia shares rallied after tech darling Nvidia’s results.
A lot rested on Nvidia posting strong results, as most of the S&P 500's over 15% year-to-date gains have come from the AI-driven rally in Nvidia and other Big Tech stocks.
Investing.com analyst Thomas Monteiro said Nvidia’s results validated “the narrative that has been propping tech stocks in general this year”.
Reuters
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.