Nvidia Earnings: Shares Surge on Booming AI Revenues

Morningstar fair value estimate for the stock raised from $480 to $730 as we upgrade our long-term profit and revenue expectations.

Brian Colello, CPA 22 February, 2024 | 10:45AM
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Nvidia released a forecast-beating earnings report on February 21 and shares spiked nearly 15% in trading the following day. Here's what our analyst thought of the earnings.

Wide-moat Nvidia (NVDA) reported another quarter of outstanding revenue and earnings while providing investors with a forecast for the April quarter that was well ahead of our expectations. Leading cloud computing companies plan to boost their capital expenditures to satisfy demand for artificial intelligence training and inference, and it appears that virtually all this spending will fall into Nvidia’s pockets.

More importantly, we anticipate healthy growth for Nvidia’s data centre revenue beyond 2024, as Nvidia’s Cuda software should contribute to strong customer stickiness for existing AI models and workloads.

Key Morningstar Metrics for Nvidia

• Fair Value Estimate: $730
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Very High

We raise our fair value estimate for Nvidia to $730 from $480 as we boost our near-term and long-term revenue and profitability assumptions, thanks to the tremendous rise in AI computing demand. We reiterate our Very High Uncertainty Rating, as the competitive landscape in AI seems to be changing almost weekly.

Nvidia’s total revenue in the January quarter was $22.1 billion, up 22% sequentially, up 265% year over year, and ahead of guidance of $20 billion. Data centre remains the only segment that should matter to investors. DC revenue of $18.4 billion was up 27% sequentially as more graphics processor packaging supply came online and was up 409% year on year and exceeded the $15.0 billion Nvidia earned in the DC segment all of last year.

Those Magnificent Seven Earnings

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About Author

Brian Colello, CPA  is a senior stock analyst with Morningstar.

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