'Long live the AI king': Nvidia crushes expectations amid AI-led demand

(Updated - August 24, 2023 5:42 AM EDT)

Nvidia reported better-than-expected second-quarter results and upbeat guidance as the race to adopt generative artificial intelligence continues to bolster demand for its chips.

NVIDIA Corporation (NASDAQ: NVDA) was up more than 7.5% in pre-market Thursday trade.

Nvidia announced adjusted EPS of $2.70 on revenue of $13.51 billion. Analysts polled by Investing.com anticipated EPS of $2.07 on revenue of $11.13 billion.

The high-margin data center business jumped 171% to a record $10.32B in Q2 from a year ago as businesses transition to accelerated computing and generative AI from general-purpose computing.

As demand for AI ramps up, Nvidia's suite of AI-related products including chips and a cloud service to train generative AI models have become the dominant option for startups, or businesses looking to expand into AI. The chipmaker said it expects supply to rise each quarter through next year.

Revenue in its gaming business rose 22% to $2.49B for the quarter.

For the fiscal third quarter, the company forecast revenue of $16B, give or take 2%. That was above estimates from Investing.com for $12B. Gross margins are expected to be 71.5% and 72.5%, respectively, plus or minus 50 basis points.

The much better-than-expected guidance ... "will be fuel in the engine to ignite a tech rally we see continuing into the rest of the year despite the recent pullback and Fed jitters," Wedbush said in a Wednesday note following Nvidia's earnings.

The latest results also signal that enterprise spending on AI is set for a massive boost, Wedbush adds, that will benefit AI-related companies including Microsoft (NASDAQ: MSFT), Google (NASDAQ: GOOGL), Apple (NASDAQ: AAPL), Oracle (NYSE: ORCL), Palantir (NYSE: PLTR), MongoDB (NASDAQ: MDB), Snowflake (NYSE: SNOW), Salesforce (NYSE: CRM), AMD (NASDAQ: AMD), C3.AI (NYSE: AI) and many others.

The chipmaker also unveiled an additional $25B stock buyback plan, with stock repurchases expected to continue through this year. Nvidia said it spent $3.28 billion on buybacks in Q2.

Stifel analyst Ruben Roy upgraded the stock to Buy from Hold with a price target of $600 per share.

"While we have long viewed NVDA as the primary beneficiary of the increasing investments being made on large language models/ generative AI training clusters, we underestimated the opportunity related to the potential shift of $1 trillion of installed data center infrastructure from general purpose compute to accelerated compute architectures," the analyst said in a note.

Morgan Stanley analyst Joseph Moore said the company reported "another exceptional quarter."

"Last quarter was the first time in semis history that we saw a company guide revenues $4 bn above consensus; with admittedly higher expectations this quarter, NVDA did it again, with its data center business growing more than 3x in 6 months."

Elsewhere, Rosenblatt analyst Hans Mosesmann hiked the price target to $1,100 per share.

Additional reporting by Senad Karaahmetovic

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