Market Commentary

AI and Gaming Strength Send Nvidia Shares Soaring

Raza Akram
6 Feb 2024 · 2 minutes read

Nvidia (NVDA:US) stock had one of its best trading days recently after gaining 14% on Thursday. Shares of the chipmaker surged after the company posted fourth-quarter results that beat analysts’ expectations and offered positive revenue guidance.

While revenue fell 21% to $6.05 billion in the fourth quarter, it still came in higher than the average analyst estimate of $6.02 billion. Data center - Nvidia’s largest revenue stream - saw its sales rise 11% to $3.62 billion. The beat was also driven by $1.83 billion in generated gaming revenue while analysts were looking for $1.6 billion.

“Gaming is recovering from the post-pandemic downturn, with gamers enthusiastically embracing the new Ada architecture GPUs with AI neural rendering,” said Jensen Huang, founder, and CEO of NVIDIA.

On the profit side, the adjusted earnings per share were $0.88, beating the $0.81 consensus. Investors were also pleased to see that the adjusted gross margin declined 900 basis points to 66.1% from 67% in the year-ago period while analysts were expecting a 1200 bps slide.

For this quarter, Nvidia said it sees the adjusted gross margin between 66% and 67%, better than expectations for 65.8%.

Nvidia shares were trading consistently higher in recent weeks as investors increased their bets that the chipmaker will see robust demand for its high-end chips given the success of the Microsoft-backed ChatGPT AI bot.

“AI is at an inflection point, setting up for broad adoption reaching into every industry. From startups to major enterprises, we are seeing accelerated interest in the versatility and capabilities of generative AI. We are set to help customers take advantage of breakthroughs in generative AI and large language models. Our new AI supercomputer, with H100 and its Transformer Engine and Quantum-2 networking fabric, is in full production,” Huang added.

Most recently, Congress and Senate members Ro Khanna and Dan Sullivan, respectively, both disclosed they were buying Nvidia shares. Rep. Sullivan invested in the chipmaker on November 22, when the stock closed at $160.38. Shares closed at $236.64 per share on Thursday.