NVIDIA's latest financial results exceed expectations, and its stock price hits

Few stocks can have such a significant impact on the overall market. Looking ahead, Huang Renxun stated that with the upcoming launch of the next-generation Blackwell architecture chips, the company is preparing to embrace "the next wave of growth."

The characteristics of the U.S. economy can be summarized as "mildly declining, yet stubbornly resilient."

Chip giant NVIDIA released its financial results for the most recent quarter on May 22. Due to revenues and profits that significantly exceeded the optimistic expectations of Wall Street analysts, its stock price continued to rise by more than 7% in after-hours trading, reaching a historical high of $1020. The after-hours trading stock prices of several leading U.S. semiconductor companies were also stimulated to rise.

A few hours before NVIDIA's Q1 2024 financial report and earnings call, most Wall Street analysts expressed their expectations for NVIDIA to Caijing, "NVIDIA's performance can help investors realize more deeply whether artificial intelligence is an overhyped bubble or if the best times have yet to come; but regardless of the outcome, it will not affect Wall Street's bullish stance on NVIDIA, who would short it?"

Few stocks can have such a significant impact on the overall market. A year ago, NVIDIA's sales suddenly surged dramatically, following the shock to users by OpenAI's ChatGPT, which demonstrated its ability to generate human-like text. Analysts stated that OpenAI used tens of thousands of NVIDIA AI chips to create ChatGPT, and for the computationally intensive work of creating and deploying such systems, there are hardly any alternatives.

Over the past year, large technology companies and AI startups, such as Google, Microsoft, Meta, Amazon, and OpenAI, have invested billions of dollars in purchasing NVIDIA's GPUs (advanced and expensive chips used for developing and deploying artificial intelligence applications). NVIDIA's sales have skyrocketed, leading to a shortage of chips. Some company executives predict that this situation may persist throughout the year and possibly into next year as well.

NVIDIA's new financial quarter performance exceeded expectations.

For a considerable period, NVIDIA has been the leader in the most profitable track in the stock market. This year, NVIDIA's stock price has risen by 93%, making it the third-largest company in the United States after Microsoft and Apple. With the increase in baseline sales, the revenue growth rate has been slowing down in recent quarters. The company's revenue in the first quarter of the previous year was about $7.2 billion, which increased to $13.5 billion in the second quarter, almost doubling, then increased to over $18 billion in the third quarter, and to more than $22 billion in the fourth quarter.

On May 23, after the U.S. stock market closed, NVIDIA released its financial report for the first quarter of the fiscal year 2025. It not only passed the severe test of investor confidence but also gave everyone who believes in artificial intelligence a reason to continue believing. Its revenue was $26.044 billion, far exceeding the LSEG (London Stock Exchange Group) forecast of $24.65 billion, a significant increase of 262% compared to the $7.192 billion in the first quarter of the fiscal year 2024, and an 18% increase compared to the previous quarter's $22.103 billion. Its net profit continued to break through the ceiling of external forecasts, reaching an astonishing $14.881 billion, a significant increase of 628% compared to the $2.043 billion in the same period of the previous year. Reflected in the adjusted earnings per share, it was $6.12, higher than the LSEG consensus expectation of $5.59.

The burst of the artificial intelligence track has ignited investors' enthusiasm.Previously, the market was concerned about the unsustainable gross margin, which continued to rise. The company's latest gross margin reached 78.4%, compared to 76% in the previous quarter and 64.6% in the same period last year. Almost all performance indicators have shattered external doubts about whether the "US stock AI bubble is too large." After making a fortune, NVIDIA is also increasing its efforts to "distribute money." The latest financial report also announced a 1-for-10 stock split and increased the quarterly dividend payment by 150% to 10 cents per share. The company is also very optimistic about the expectations for the next financial report, with an estimated revenue of about 28 billion US dollars for the second fiscal quarter, higher than the previously expected 26.8 billion US dollars by analysts. After the financial report was released, NVIDIA's stock price soared again, rising by 6% in after-hours trading, breaking through 1,000 US dollars for the first time, reaching 1,006.72 US dollars, and the market value also reached 2.34 trillion US dollars.

NVIDIA's performance growth and stock price increase have also had a significant impact on the artificial intelligence industry and the US stock market. NVIDIA's chips have become the gold standard in the field of artificial intelligence, and its performance is widely regarded as a barometer for the rapidly developing AI industry. It is the burst of the artificial intelligence track that has stimulated investors' enthusiasm and promoted the bull market of US stocks. When NVIDIA's performance was announced, the S&P 500, Nasdaq, and Dow Jones all set historical highs this month after a turbulent April, mainly boosted by a strong financial reporting season and new hopes for the US economy to achieve a so-called soft landing.

Jeffrey Young, former Global Head of Foreign Exchange at Citigroup and Co-Founder and CEO of DeepMacro, told "Finance" that the characteristics of the US economy can be summarized as "mild decline, but stubbornly strong." Despite considerable fluctuations in the views of the Federal Reserve, the media, and market sentiment, this performance has remained unchanged.

Another manifestation of the NVIDIA myth is that its increased weight in indices and exchange-traded funds has made its stock price fluctuations have an oversized impact on the entire market. The stock now accounts for more than 5% in the S&P 500 index, 6.5% in the Nasdaq 100 index, and 20% in the VanEck Semiconductor ETF.

NVIDIA's stock price rose by more than 7% in after-hours trading. In Japan, Advantest's stock price once rose by 5.2%; Disco rose by 5.2%, Ibiden rose by 5%, Lasertec rose by 4%, Tokyo Electron rose by 3.8%, and Nidec rose by 2.8%. In the South Korean stock market, TSE rose by 6.8%, Wonik IPS rose by 3.3%, and SK Hynix rose by 3.2%. In China's domestic market, suppliers such as Foxconn (601138.SH) and Inspur Information (000977.SZ), which have long-term cooperation with NVIDIA, continued to perform strongly in the capital market. The "high-speed copper cable" and "glass substrate" concepts, which have become popular due to NVIDIA's new products, have recently attracted a lot of attention. The business progress of related concept stocks such as Luxshare Precision (002475.SZ), Sheng Lan Shares (300843.SZ), and V-Technology (603773.SH) has become the focus of the market.

How promising is the prospect of AI chips and data business?

Jensen Huang exclaimed at the performance meeting, "The next industrial revolution has begun." With the help of NVIDIA, data centers worth 1 trillion US dollars are becoming "AI factories." NVIDIA's strong data center business provides the greatest momentum for performance growth, achieving a revenue of 22.6 billion US dollars, a significant increase of 427% compared to the same period last year, and a sequential increase of 23%. NVIDIA's CFO, Colette Kress, said at the performance explanation meeting, "(In this fiscal quarter) the demand from customers in different segments is very strong, among which the demand from enterprises and consumer internet companies is the most obvious. Large cloud service providers have also brought us revenue growth while deploying and upgrading their infrastructure."

The chips code-named Blackwell launched by NVIDIA will sell for more than 30,000 US dollars each. If the market demand for AI chips remains strong, and NVIDIA can withstand challenges from competitors and regulatory authorities, these chips will inevitably bring about a further surge in sales. The Blackwell architecture and its complete set of artificial intelligence computing solution kits put it in a leading position in the field of artificial intelligence accelerator solutions. The industry is shifting from training AI models with large language models (LLMs) to deploying multimodal models, coupled with the increasing indispensability of AI inference, and large-scale cloud computing service providers are expanding their infrastructure, making NVIDIA the biggest beneficiary among AI hardware suppliers. Analysts say that before the advent of Blackwell, the time required to obtain the H100 AI chip (NVIDIA's most advanced chip to date) has been reduced from nearly a year to a few weeks.

According to research by Counterpoint Research, the global capital expenditure of cloud computing service providers in 2023 only increased by 4%. However, it is expected to surge by 42% in 2024, mainly due to the large investment in artificial intelligence infrastructure by US cloud computing service providers.

In addition, NVIDIA's gaming and AI PC business achieved a revenue of 2.6 billion US dollars, a year-on-year increase of 18%; the professional visualization business achieved a revenue of 427 million US dollars, a year-on-year increase of 45%; the automotive business achieved a revenue of 329 million US dollars, a year-on-year increase of 11%.In the Chinese market, Colette Kress stated at the earnings call that the company has added new products to the Chinese market that do not require licenses, and since the implementation of the new U.S. export policy last year, there has been a noticeable impact on revenue from the Chinese market. This year, NVIDIA launched the "China-specific" GPU H20 for the Chinese market. H20 has been open for pre-orders since March, but shipments have not yet begun. Previously, there were reports suggesting that the shipment of H20 would be in Q2; with Q2 now more than halfway through, this chip, which is very important for the Chinese market, may soon be released.

Looking ahead, Jensen Huang expressed that with the upcoming launch of the next-generation Blackwell architecture chips, the company is preparing to welcome "the next wave of growth." He also revealed during the Q&A session of the earnings call that the production of Blackwell has been underway for some time, and shipments are expected to begin in the second quarter of the fiscal year 2025. Akshara Bassi believes that with the increase in GPU sales, as well as the growth of its diversified artificial intelligence software revenue streams, NVIDIA is strategically well-positioned to take advantage of this growth wave. NVIDIA anticipates that its revenue for the second quarter will reach $28 billion, exceeding market expectations of $26.61 billion.