Nvidia Shows ‘Em: Explosive Results Boost Nervous Market

Before the chipmaker’s earnings release, stocks had been down.

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.

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