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Nvidia's Earnings AI Forecast Sparks Surge in Semiconductor Stocks

Published 2024-05-23, 11:16 a/m
© Reuters.  Nvidia\'s Earnings AI Forecast Sparks Surge in Semiconductor Stocks

Quiver Quantitative - Nvidia (NASDAQ:NVDA) (NVDA) surged 9% on Thursday after its impressive revenue forecast reinforced investor confidence in the AI-driven boom in chip demand, boosting shares across the semiconductor sector. Nvidia's strong performance capped a successful quarter for U.S. technology giants, with AI emerging as a significant growth driver. The company's shares, trading near record highs before the earnings announcement, reflected high expectations, which were more than met.

"Companies are continuing to increase their capital expenditures, particularly Big Tech, to keep up with this revolutionary technology, and Nvidia is by far the biggest beneficiary," said Josh Gilbert, market analyst at eToro. Nvidia also announced a 10-for-one stock split on Wednesday and increased its quarterly dividend by 150%, driven by continued high demand for its advanced chips powering AI applications, including OpenAI's ChatGPT. The company's shares rose above $1,000, setting a potential milestone if they close above that level, further boosting its market value by $210 billion to $2.335 trillion.

Market Overview:

  • Investor confidence in AI drives demand for Nvidia's chips, pushing the stock near record highs.
Key Points:
  • Nvidia surpasses expectations with a blowout revenue forecast, solidifying its position in the AI race.
  • The company unveils a 10-for-1 stock split and boosts dividends, signaling confidence in future growth.
  • Nvidia's success extends to its peers, lifting shares of other AI-focused chipmakers.
Looking Ahead:
  • Nvidia's new Blackwell AI chips expected to fuel further demand, potentially exceeding supply.
  • Analyst optimism prevails, with price targets increasing and forecasts pointing towards continued market share dominance for Nvidia.
  • Stock split could attract retail investors, broadening Nvidia's investor base.

Nvidia's forecast also lifted other semiconductor stocks, with TSMC, a major Nvidia supplier, predicting 10% annual growth in the global semiconductor industry, excluding memory chips. TSMC's (TSMC) U.S.-listed shares rose 1.9%, while other AI-focused semiconductor stocks such as Advanced Micro Devices (NASDAQ:AMD), Arm (ARM), Broadcom (NASDAQ:AVGO) (AVGO), and Super Micro Computer gained between 2.2% and 9.2%. Analysts were optimistic about Nvidia's new Blackwell AI chips, expected to start shipping in the current quarter, with demand anticipated to exceed supply well into next year.

CEO Jensen Huang told Reuters that he expected new AI models capable of creating video and engaging in human-like voice interactions to drive more orders for Nvidia's processors. "With competition years behind, we believe Nvidia can comfortably defend and maintain its market share," said Ido Caspi, research analyst at Global X. Analysts also highlighted that the stock split could make Nvidia more appealing to retail investors. At least 28 of the 58 brokerages raised their price targets on the stock, pushing the median view to $1,180, according to LSEG data. Nvidia's 12-month forward price-to-earnings ratio stands at 34.7, compared to AMD's (AMD) 38 and Super Micro Computer's (SMCI) 26.8.

This article was originally published on Quiver Quantitative

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