Strong NVIDIA Performance and Guidance Indicate Unceasing AI Expansion

Nvidia

Since early 2023, Wall Street has witnessed a significant rally in technology stocks, driven by the impressive adoption of artificial intelligence (AI). While some technical and financial experts have cautioned that the AI sector is overhyped and potentially forming a bubble, NVIDIA Corp. (NASDAQ:NVDA) has defied these concerns with its latest quarterly financial results.

Blockbuster Q1 2025

NVIDIA reported revenues of $26.04 billion, a remarkable increase of 262% year-over-year, marking the third consecutive quarter of over 200% growth. This figure surpassed the consensus estimate of $24.33 billion. Adjusted earnings per share were $6.12, exceeding the consensus estimate of $5.49, compared to $1.09 per share a year ago.

The company’s data center revenues surged 427% year-over-year to $22.6 billion. Gaming revenue increased 18% to $2.65 billion. Professional visualization revenues and automotive sales were $427 million and $329 million, respectively.

The AI market has accelerated in recent years, driven by the rapid adoption of digital technologies and the Internet. These impressive results were primarily due to high shipments of NVIDIA’s Hopper graphics processors, especially the H100 GPU.

In after-market trading, NVIDIA’s stock price rose 6.1%, crossing the $1,000 mark for the first time. 

Most Important Signal

For the first time, NVIDIA indicated that customers of its high-end AI GPUs could achieve an “immediate and strong return” on their investment. Notably, about 45% of the company’s data center revenues come from major cloud providers like Amazon Web Services, Microsoft Azure, Alphabet Cloud, and Oracle Cloud.

CFO Colette Kress stated that an investment of $1 by a cloud provider in the H100 GPU could generate $5 in revenues over the next four years. With NVIDIA’s latest HDX H200 chip, which powers Meta Platforms’ Llama 3 AI model, an API provider could generate $7 in revenues for every $1 invested over the next four years.

Impressive Guidance

NVIDIA anticipates sales of $28 billion in the fiscal second quarter, higher than the current consensus estimate of $26.6 billion. CEO Jensen Huang highlighted the company’s next-generation AI chip, Blackwell, as a key upcoming driver. These chips will be available in data centers in the fourth quarter of fiscal 2025. Huang remarked, “We will see a lot of Blackwell revenue this year.” These chips are crucial for customers’ interconnected infrastructure.

What’s Next for NVIDIA?

NVIDIA, the worldwide leader in visual computing technologies and the inventor of the GPU, has evolved from focusing on PC graphics to AI-based solutions supporting high-performance computing, gaming, and virtual reality platforms.

Over the past five years, NVIDIA’s stock price has soared 25 times. In the near future, NVIDIA is expected to benefit from strong demand for its Hopper chips, driven by the significant adoption of generative AI and an industry-wide shift from central processors to NVIDIA-made accelerators. Despite an improving supply of NVIDIA chipsets, demand is likely to outpace supply, potentially leading to price hikes for chips.

The AI market is projected to grow significantly in the coming decade. Its current size of $200-$300 billion is expected to reach nearly $2 trillion by 2030, according to several research agencies.

NVIDIA’s stock price has jumped 210% in the past year and 92% year-to-date. Following the first-quarter fiscal 2025 results, momentum is likely to continue for this new darling of Wall Street.

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