Chip giant Nvidia (NVDA) gave tech investors relief on Wednesday.
In the days before the company announced its fourth quarter results, the stock had been looking wobbly, strange because it had been a powerhouse for months.
By Wednesday, in fact, the shares had dropped nearly 11% since Nov. 14.
The tensions rose. Investors seemed more than just worried that Nvidia, the maker of high-end chips used in artificial intelligence applications, would miss analysts' estimates for its fourth quarter. Weak results would turn fears about the direction of stocks generally into a full-scale rout.
The fears fall away
Nvidia did not disappoint. The reason Nvidia cheered investors is the demand for its data center chips and artificial-intelligence software is accelerating.
AI is at a tipping point, CEO Jensen Huang said on the company's earnings call, because of its ability to combine computing power and software to suck in and make sense out of immense volumes of data.
Name the industry, he said, and the players want to get the ability to harness the data. "Demand is surging worldwide across companies, industries and nations."
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The problem for Nvidia: Not enough manufacturing capacity to meet the exploding demand.
The company said its fourth-quarter profits were up 28% from the third quarter and 486% from a year earlier.
Revenue came in at $22 billion, up 265% from a year ago.
For the year, revenue of $60.9 billion was up 126% from fiscal 2023.
The guidance was equally strong. The company sees revenue for first quarter of its 2025 fiscal year hitting $24 billion, up 9% from the fourth quarter and a gain of 233% from the first quarter of 2024.
The gross profit margin would be 76.3% to 77%. In the quarter just ended the gross margin was 76.7%.
The stock was trading at $736 after hours, up more than 9% from the close of $674.72 and just below its all-time closing high of $739 set on Feb. 14. At the time, the shares were up 49% for the year. With Wednesday's closing price, the gain is now 36.3%. It should rise on Thursday.
Nvidia finished 2023 up 239% and became a key member of the Magnificent 7 group of stocks. The others are Apple (AAPL) , Amazon.com (AMZN) , Google-parent Alphabet (GOOG) , Meta Platforms (META) , Microsoft and Tesla (TSLA) .
(Amazon will be joining Apple and Microsoft as a member of the Dow Jones Industrial Average on Monday.)
That said, Nvidia has been a very pricey stock of late with its relative strength index running well into the 80s when the stock hit $739. An RSI over 70 on a stock is a signal it's overbought. Over 80 suggests it's ready to sell off, and Nvidia fell back.
A relative strength index is a measure of how fast a stock's price is changing.
How the businesses performed
Nvidia offered results from its four big businesses, starting with its data center, the biggest segment.
Data Center: Revenue of $18 billion, up 27% from the third quarter and 409% from a year ago. For the full year, revenue was up 217% to $47.5 billion. Microsoft and Meta Platforms alone are expected to buy a third of this group's output.
Gaming. This is the business that got Nvidia its start. Revenue: $2.9 billion, flat from the third quarter and up 56% from a year earlier. Full-year revenue: up 15% to $10.4 billion.
Professional visualization. Revenue $463 million for the quarter, up 105% from a year ago. Full-year revenue up 1% to $1.6 billion.
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Automotive. Fourth-quarter revenue at $281 million was up 8% from the third quarter but down 4% from a year earlier. Full-year revenue jumped 21% to $1.1 billion.
The China question is a concern
Nvidia was selling as much as 20% of its production to companies in China, but the Biden administration had limited the licenses to sell the most sophisticated chip units to equipment in that country.
The move affected data-center sales, the company said, while not offering a dollar figure.
It did suggest China sales are something less than 10% of data center revenue..
Nvidia builds much of its business about general processing units or GPUs. It sells its H100 line units at $30,000 to $40,00 a unit.
The H200 units are just coming on line and will get better prices, and a new product, the B100 series, known as Blackwell, is expected to be launched in March at the company's Global Technology Conference.
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