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Nvidia
shares were surging Thursday as analysts welcomed results showing the artificial-intelligence boom is powering its growth. It also relieved concerns about supply constraints and how far demand is being driven by Chinese customers.
Nvidia
(ticker: NVDA) stock was up 8% to $508.87 in premarket trading on Thursday after its quarterly earnings and outlook came in well above analysts’ projections.
Nvidia not only beat expectations, it also addressed several concerns about whether its progress is sustainable. The company said it expects product supply to increase in the next fiscal year, alleviating worries that it won’t be able to meet rising demand for AI chips.
“With visibility extending into ’24, [Nvidia] management has qualified additional suppliers…and expects to increase supply each quarter through next year to meet demand,” KeyBanc analyst John Vinh wrote in a research note.
Vinh raised his target price on Nvidia to $670 from $620 and kept an Overweight rating on the stock. The new target is based on a forecast price-to-earnings multiple of 35 times for 2025.
Revenue from China was within the company’s historical range of between 20% and 25%, indicating the beat wasn’t driven by Chinese orders being pulled forward over fears of future U.S. restrictions. The breadth of demand underlined expectations of a large-scale shift in data centers toward using Nvidia’s graphics-processing units to power AI tools and away from general-purpose processors.
“We expect shares to continue to re-rate higher as Nvidia delivers on [the] AI story…vidia remains the purest scale play on AI adoption,”
Oppenheimer’s
Rick Schafer wrote in a research note.
Schafer raised his target price on Nvidia to $650 from $500 and kept an Outperform rating on the stock.
Nvidia wasn’t the only stock gaining in the wake of its report, as investors bet AI will power growth for other hardware and software companies. Chip maker
Advanced Micro Devices
(AMD) rose 3.3% in the premarket, while
Microsoft
(MSFT) gained 2.2% and Google-parent
Alphabet
(GOOGL) rose 1.4%.
“Strong competition is important for a healthy innovation ecosystem. The market should want to see another player and should want to see this next digital transformation boom be more pervasive and persistent versus a bubble of irrational exuberance,” said Daniel Newman, CEO of technology research firm Futurum Group.
Newman said the report showed there should be opportunities for companies such as AMD and
Intel
(INTC) to provide rival AI chip offerings. However, he noted the window for alternatives to grow could be narrowing as Nvidia increases the attractiveness of its own platform via software development and industry partnerships.
Intel was up 0.4% in premarket trading.
Write to Adam Clark at [email protected]
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