Nvidia (WKN: 918422) has dispelled fears of a significant price correction phase with surprisingly strong quarterly figures. Nasdaq shares rose almost double-digit again on Wednesday after the market closed. However, the details of the new report also give cause for skepticism.
ℹ️ Nvidia introduced
- Nvidia Corporation is one of the world’s largest developers of graphics processors and chipsets.
- The group’s chips and processors are used in personal computers, game consoles and data centers.
- The company, based in Santa Clara, California, is the market leader in high-performance chips for applications based on artificial intelligence.
- Nvidia is a member of the US leading indices Nasdaq 100 and S&P 500 and is currently the fourth most valuable company in the world with a market value of US$1.81 trillion.
After-hours jump back towards all-time high
With surprisingly strong quarterly figures, Nvidia has once again proven the lie to skeptics and further fueled the global AI hype.
The chip giant’s shares jumped by over +9% to just under US$ 736 after the US market closed on Wednesday evening after the company significantly exceeded analyst estimates with its financial update.
The late price jump caused the tech company’s market value to rise by US$130 billion and also drove up other AI specialists such as the chip designer Arm.
All Wall Street estimates pulverized
The sharp price correction at the beginning of the week actually indicated that the market was ready for profit-taking following the Nvidia figures given high expectations and a deteriorating macro environment.
However, the AI powerhouse’s new quarterly results and forecasts have once again convinced investors that the artificial intelligence boom is not a stock market fairy tale, but the most important bet of companies worldwide.
Nividia reported a three-fold increase in sales to US$22.1 billion for the final quarter, exceeding Wall Street’s expectations by over 7%. Adjusted earnings per share were US$5.16, also well above the average estimate of US$4.64.
In that year, the already high demand for Nvidia’s chips for data centers and graphics processors appears to be growing rapidly: For the current quarter, management forecast sales growth of 233% to US$ 24 billion compared to the same period last year, while analysts expected an average of 208% .
Margins grow more slowly
Nvidia undoubtedly delivered excellent quarterly results that shattered all expert estimates. The Americans then speak of a blowout.
However, investors should not become euphoric in view of these top figures, but should take a closer look at the numbers and multipliers. This shows that the growth is largely driven by the business development of data centers, while other segments such as gaming and automotive are already recording slower rates.
The new guidance also suggests a slowdown in the pace of growth, which may disappoint overly bullish investors. Uncertainty regarding the high valuation of Nvidia shares is also created by the fact that gross margins have not increased that much. The reported record earnings per share are mainly due to the increase in sales.
Conclusion: Euphoria brake ahead
The US company is currently the leader in the AI chip sector with an estimated market share of 70%. However, investors now need to keep a close eye on the competition from AMD and Intel. The two rivals’ new product lines (MI300X and 5th Gen. Xeon) pose a threat to their dominant position, as does Intel’s partnership with Microsoft.
Given these prospects, I am skeptical about the valuation of Nvidia shares. The forward P/E ratio has already reduced from 80 to 56 compared to the trailing 12-month earnings valuation, suggesting that the market has begun to price in lower future growth.
In my opinion, the tech giant’s title does not currently go beyond a “hold” recommendation, even if I remain convinced of the dynamics of the AI revolution and the company’s products.
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