Nvidia shares rocketed Thursday after the graphics-chip maker crushed Wall Street's targets for its fiscal first quarter on record data-center sales. NVDA stock surged more than 20% in morning trades.
The Santa Clara, Calif.-based company late Wednesday said it earned an adjusted $1.09 a share on sales of $7.19 billion in the quarter ended April 30. Analysts polled by FactSet had expected Nvidia earnings of 92 cents a share on sales of $6.53 billion. On a year-over-year basis, Nvidia earnings dropped 20% while sales declined 13% amid continued weak gaming-chip sales.
For the current quarter, Nvidia forecast sales of $11 billion, up 64% year over year. That target obliterated Wall Street's consensus estimate of $7.2 billion for fiscal second-quarter revenue.
Chief Executive Jensen Huang said his company is ramping up production to meet the massive demand for artificial intelligence technology.
NVDA Stock Surges After Report
In morning trades on the stock market today, NVDA stock screamed 24.4% higher to 379.85. During the regular session Wednesday, NVDA stock dropped 0.5% to close at 305.38.
"The computer industry is going through two simultaneous transitions — accelerated computing and generative AI," Huang said in a news release. "A trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process."
He added, "Our entire data center family of products — H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand and BlueField-3 DPU — is in production. We are significantly increasing our supply to meet surging demand for them."
In the first quarter, Nvidia's data-center sales rose 14% year over year to $4.28 billion.
That growth reflected strong demand from large consumer internet companies and cloud service providers for its graphics processing units and related tech, Chief Financial Officer Colette Kress said in a statement. Customers are using its chips for artificial intelligence applications, including generative AI, she said.
Gaming-Chip Sales Remain Soft
Meanwhile, Nvidia's gaming-chip business saw sales decline 38% year over year to $2.24 billion in the first quarter. The decrease was the result of weaker demand due to the macroeconomic slowdown and lower shipments to normalize channel inventory levels, Kress said.
Wall Street analysts gushed about Nvidia's beat-and-raise report.
"Nvidia delivered strong upside in terms of reported fiscal Q1 results, as well as fiscal Q2 guide," Wells Fargo analyst Aaron Rakers said in a note to clients. He called Nvidia's report "positive" in all caps with an exclamation point.
"Nvidia absolutely blew away prior expectations with their guide," Wedbush Securities analyst Matt Bryson said in a note to clients. "I can't remember a semiconductor/hardware company as big as Nvidia (multiple billions in sales) ever surprising with a guide this much higher vs. expectations in my 20 years covering technology stocks."
Nvidia Chief Warns Of Trade War Fallout
Earlier Wednesday, the Financial Times posted an interview with Nvidia Chief Executive Jensen Huang in which he warned about the negative impact of U.S. trade restrictions on China.
The U.S. tech industry is at risk of "enormous damage" from the escalating battle over chips between Washington and Beijing, Huang said. U.S. export controls introduced by the Biden administration are cutting off American companies from a huge market, he said.
Nvidia is barred from selling its most advanced chips to China. The U.S. government is worried that China will use advanced processors for military applications.
NVDA Stock Gets AI Boost
NVDA stock has risen 109% year to date through Wednesday's close over investor enthusiasm for its critical role in the burgeoning artificial intelligence field. On Tuesday, Nvidia announced AI technology partnerships with Microsoft and Dell Technologies.
And last week, Nvidia announced a collaboration with ServiceNow to develop enterprise-grade capabilities in generative AI.
Nvidia ranks fourth out of 37 stocks in IBD's fabless semiconductor industry group, according to IBD Stock Checkup. NVDA stock has an IBD Composite Rating of 98 out of 99.
Also, NVDA stock is on the IBD Leaderboard and Tech Leaders lists.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
