Nvidia stock rises on growth forecast, drives market surge on renewed AI interest
Nvidia has reported better-than-expected quarterly revenue for the first three quarters of 2023, exceeding analyst estimates by 10-20 percent. The company forecasts a first-quarter revenue growth of 233 percent, surpassing Wall Street's expectations of 208 percent growth.
Nvidia, the leading provider of artificial intelligence (AI) chips, has projected a significant threefold increase in quarterly revenue, surpassing market expectations and propelling its shares up by 10 percent in after-hours trading, Reuters reported.
The robust demand for Nvidia's data centre chips and graphics processing units (GPUs) continues to rise as companies strive to expand their AI capabilities, it added. Nvidia's silicon maintains dominance in the global AI chip market, with Microsoft among its prominent clients.
Nvidia has reported better-than-expected quarterly revenue for the first three quarters of 2023, exceeding analyst estimates by 10-20 percent. The company forecasts a first-quarter revenue growth of 233 percent, surpassing Wall Street's expectations of 208 percent growth.
The late-day surge in Nvidia's stock has boosted the company's market capitalisation by over $129 billion. This positive momentum has also impacted other AI-related firms, including Arm Holdings, contributing to a combined increase of $160 billion in stock market value.
Sales, Outlook and Revenue Share
While Nvidia's financial outlook remains optimistic, some analysts question the sustainability of its rapid growth, the report said.
The company anticipates first-quarter revenue of $24.0 billion, plus or minus 2 percent, exceeding the average analyst expectation of $22.17 billion.
Sales in Nvidia's data centre segment, the largest by revenue share, surged by 409 percent to $18.4 billion in the fiscal fourth quarter, surpassing estimates, as per LSEG data. However, concerns persist about the company's ability to meet the soaring demand for its chips in the short term.
Nvidia's supply chains, strained by high demand, are gradually improving. Analysts told Reuters they expect Taiwan Semiconductor Manufacturing Co's (TSMC) enhanced packaging capacity to alleviate supply constraints in the first half of the year.
Despite facing tightened trade restrictions, Nvidia's revenue has continued to grow. The company recently disclosed receiving antitrust inquiries from regulators in France, the European Union, the United Kingdom, and China regarding GPU sales and supply allocation.
In December, United States Commerce Secretary Gina Raimondo revealed ongoing discussions between the Biden administration and Nvidia regarding permissible sales of AI chips to China. Nvidia's CEO, Jensen Huang, expressed commitment to adhering to the Commerce Department's established rules.
Nvidia's Strong Sales Forecast Fuels Market Surge
With the AI chip-making company delivering a robust sales forecast, Nvidia reignited the AI fervour that fueled last year's stock-market rally. Its own share boost became a driving force in the market, as per a Bloomberg report.
The positive momentum extended to index futures, with Nasdaq 100 futures climbing over 1 percent and Competitors Advanced Micro Devices Inc. and Intel Corp. also saw gains, it added.
Global peers and suppliers experienced rallies as well. SK Hynix Inc., a key memory chip supplier to Nvidia, rose 4.7 percent in early trading in Seoul, while Japanese chip-tester maker Advantest Corp. surged by 6.3 percent.
"Nvidia has been the market driver for the past 11 months. As goes Nvidia, so goes the market. The results confirm the narrative that AI will remain strong," Kim Forrest, Chief Investment Officer at Bokeh Capital Partners LLC told Bloomberg.
Nvidia stock has jumped over 30 percent in 2024 so far and is rivalling Amazon and Alphabet in the top five for a spot among the most valuable companies.
Another analyst, Thomas Martin, Senior Portfolio Manager at Globalt Investments said that with this revenue beat and raised guidance, Nvidia will continue to grow and lead in AI, and the strong demand for its products and growth solidify its position in the market.
(With inputs from Reuters and Bloomberg)
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