NVIDIA Reinforced Its Abilities
"The most important stock on planet Earth", under a version of Goldman Sachs Group's trading desk, confirmed its strength last night. NVIDIA's share price jumped by 8.5% in the first hour of extended trading on Wall Street to test its near all-time high levels above $730, following Q4 earnings beat in both top and bottom lines. The AI drive pacemaker slowed its endless rally for a couple of days ahead of this quarterly report, yet it started the engine with renewed vigor.
This set the tone for the S&P 500 broad market barometer, which passed the 5,000 round figure. Peer assets from chip, cloud and other AI-related segments cheered up. Broadcom Inc (AVGO), Advanced Micro Devices (AMD), CrowdStrike (CRWD) immediately added 2% to 3% to their market values in after-hours, while Arm Holdings climbed by more than 5.
The Wall Street consensus preliminarily priced-in a more than three-fold growth in sales YoY, yet ultimately it came out beyond wildest expectations. The giant announced EPS (earnings per share) of $5.16 on revenue of $22.1 billion against analyst poll consensus of $4.64 per share on revenue of $20.55 billion, compared to $4.02 of EPS on revenue of $18.12 billion in Q3 and $0.88 of EPS on revenue of $6.05 billion just one year ago. Behind the numbers was that global extra demand for AI chips fully offset the potential damage from the U.S. export ban to China clients.
Data centre division contribution soared to $18.5 billion, up 409% YoY, which was far above average expert projections of nearly $17 billion, with graphic processing units (GPUs) reigning supreme led by the H100 model. The pricing uptrend for the benchmark H100 chips already created a vast share of NVIDIA's extra income. However, the newly launched H200 model was priced at a nearly 35% premium to the H100, with the latest GH200 getting a 50% premium. Besides, NVidia is going to produce its next-generation B100 Blackwell into its AI-focused lineup to ease some capacity issues.
Orders from Microsoft (MSFT) and Meta Platforms (META) reportedly provided around a third of the overall data centre sales. Analyst polls reassessed a free space for total data centre revenues by forecasting a fivefold leap from the year-earlier period, so that a fiscal year of 2024 would give around $81.1 billion. They also guess gross margins of NVIDIA businesses may rise to 75.5% in the current quarter to hold this achievement until the end of this fiscal year.
We identify $950 per share as the next reasonable target area for NVidia stock. We also agree with the Wedbush analyst Dan Ives who noted that NVidia and Microsoft "are the first derivatives of the AI Revolution, with the second/third/fourth derivatives of AI now starting to form in this market, which speaks to our 2024 tech bull thesis playing out".
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