BBAI - Nvidia approaches $1T market cap as Wall Street praises 'jaw dropping guidance'

2023-05-25 07:54:15 ET

Nvidia ( NASDAQ: NVDA ) shares surged more than 25% in pre-market trading on Thursday after the semiconductor giant posted first-quarter results and guidance that stunned investors, leaving many on Wall Street to suggest the figures are the start of the artificial intelligence revolution.

Wedbush Securities analyst Dan Ives said the results and guidance are the single best indicator of demand for AI, given the hype surrounding products and services like ChatGPT.

"For any investor calling this an AI bubble (crypto, metaverse, now AI bubble thesis) we would point them to this Nvidia quarter and especially guidance which cements our bullish thesis around AI and speaks to the 4th Industrial Revolution now on the doorstep with AI," Ives wrote in an investor note.

On the company's earnings call , CEO Jensen Huang reiterated his stance that AI's "iPhone moment" is here.

"The integration of guardrails and alignment systems were through reinforcement learning human feedback, knowledge vector data bases for proprietary knowledge, connection to search, all of that came together in a really wonderful way and it's the reason why I call it the iPhone moment, all the technology came together and helped everybody realize what an amazing product that can be and what capabilities it can have," Huang said.

Recent sales growth for Nvidia's ( NVDA ) four major product lines vindicated Huang's comments, as shown by the below graphic.

Ives added that he had never seen a guidance range like this, while noting the opportunity in AI is likely to be worth some $800B over the next decade and significantly more as adoption increases.

"While this is an AI arms race being played out, its clear the AI revolution is not going away and remains one of the most investable tech themes we have seen in decades despite the near-term macro backdrop with debt ceiling and recession worries front and center," Ives wrote.

Bernstein analyst Stacy Rasgon, who likened the results and guidance to "The Big Bang," reiterated his outperform rating and boosted his per-share price target to $475 from $300.

He added that the only question that matters anymore is if the new datacenter trajectory is the new normal or just a surge based on the hype of generative AI.

J.P. Morgan analyst Harlan Sur reiterated the firm's overweight rating on Nvidia, while doubling the price target to $500 from $250, noting the guidance is the first "massive wave" for the demand for generative AI.

"Generative AI and large language/transformer models are driving accelerating demand for Nvidia's accelerated compute/networking platforms and software solutions," Sur wrote in an investor note.

Craig Hallum analyst Richard Shannon upgraded Nvidia ( NVDA ) to buy and boosted the per-share price target to $500 from $190, noting the guidance is "without precedent" in terms of upside to consensus.

In total, 21 Wall Street firms raised their price targets on Nvidia ( NVDA ) following its strong first-quarter results and guidance.

Nvidia ( NVDA ) said it expects second-quarter revenue to be $11B, plus or minus 2%, well above the $7.18B analysts were expecting.

The company added it is "significantly" increasing its supply for products related to its data center business amid the surge in interest surrounding artificial intelligence.

Taiwan Semiconductor ( TSM ), which produces chips for Nvidia, surged more than 6% on back of the results and guidance.

Shares of closely related chip stocks also surged on back of the results, including AMD ( AMD ), Marvell Technology ( MRVL ), and Synaptics ( SYNA ), as did other artificial intelligence-related stocks, including Microsoft ( MSFT ), C3.ai ( AI ), SoundHound AI ( SOUN ) and BigBear.ai Holdings ( BBAI ).

Conversely, Intel ( INTC ), which competes with Nvidia and AMD in the data center space, saw its shares fall nearly 2% .

More on Nvidia and its blowout earnings

• Nvidia Fiscal Q1 2024 Earnings: Solid Beat, But Hedge Your Bets
• Nvidia Stock Soars On Blowout Guidance
• NVIDIA Corp. Q1 2024 Earnings Call Transcript

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