If anyone doubted that tech stocks are the place to be, chipmaker Nvidia Corp.’s blowout results Wednesday, released after the market’s close, put a rest to that. The company’s stock vaulted 7% in after-hours trading.
Benefiting from its strong presence in the artificial intelligence semiconductor market, Nvidia posted $5.16 in adjusted earnings per share on revenue of $22.1 billion for its fourth quarter, way north of analysts’ consensus, from a Bloomberg survey, of $4.60 on $20.4 billion. Results were also stunning for the whole fiscal year, ending January 28, with EPS up 486%, versus the comparable period.
The nervousness about Nvidia that pulled the market into the red on Tuesday continued into Wednesday, with the Invesco QQQ Trust, an exchange-traded fund that is a benchmark for hot tech stocks, falling 0.4% by the close. After the earnings release, the QQQ leapt almost 1%.
Perhaps a feeling of this-is-too-good-to-be true had gripped investors before the release. Nvidia, which had advanced 40% this year, slipped 2% in Wednesday trading. The S&P 500 was also down for much of the day, closing up 0.13%, then rallied after hours.
The company’s shares have done well over time, observed Larry Tentarelli, the chief technical strategist at Blue Chip Daily Trend Report, in a note. The good thing is that it is still relatively inexpensive for a tech name, with a forward price/earnings ratio of 37.55.
Tentarelli pointed out that, of course, Nvidia “cannot continue to grow [so fast] year-over-year indefinitely,” but still has room to rise. His firm’s 12-month price target is $875, about a third more than the current price ($674 at Wednesday’s close).
The bet is that Nvidia will be the chief beneficiary of a burgeoning AI computing surge. Fellow members of the Magnificent Seven tech giants—Amazon, Meta, Facebook and Alphabet—account for around 40% of Nvidia’s revenue, as they move into AI.
Nvidia began posting record results three quarters ago as AI fever gripped Wall Street and the world. The company’s market cap blew past the $1 trillion mark in June, and now sits at $1.66 trillion.
Certainly, there are headwinds. The once-expanding China market is pulling back on chips from foreign producers, and rival Advanced Micro Devices Inc. is developing its own cutting-edge semiconductors.
Tags: Advanced Micro Devices, Artificial Intelligence, China, Larry Tentarelli, Nvidia, S&P 500, Stocks, Tech