Nvidia Corp. (NVDA) reported its Q1 earnings on Wednesday, exceeding expectations and driving shares up by 26% in after-hours trading. The chipmaker's strong performance was attributed to increased demand for gaming and data center products, as well as growth in the automotive and professional visualization markets.
Nvidia's Q1 revenue was $5.66 billion, up 84% from the same period last year and surpassing the $5.41 billion expected by analysts. Earnings per share were $3.66, beating estimates of $3.28.
On the company's earnings call, CEO Jensen Huang pointed to two good AI plays: the acquisition of Arm Holdings from SoftBank Group Corp. (SFTBY) and the development of its Grace data center CPU, which is designed specifically for AI workloads.
Nvidia's forecast for surging revenue surprised even the most bullish analysts on Wall Street, propelling the company to the cusp of becoming the world's most valuable chipmaker. The company's market capitalization currently sits at around $500 billion, just behind Intel Corp. (INTC) at $223 billion and Taiwan Semiconductor Manufacturing Co. (TSM) at $549 billion.
Cathie Wood's flagship exchange-traded fund, Ark Innovation ETF (ARKK), sold its Nvidia stake in early January. However, the company's strong earnings report and focus on AI have led Wood to back automation, which she believes represents another key opportunity for the company.
Rough calculations suggest that Ark Invest missed out on over $200 million in potential profits when it sold Nvidia stock throughout the end of 2020 and early 2021.
Nvidia's stock performance has been a boon for some names but has sent shares of conventional CPU manufacturers such as Intel down in recent years. However, Intel has announced plans to diversify into the AI market and recently unveiled its own dedicated AI chip, the Intel Nervana.
The AI boom is here, and Nvidia is reaping all the benefits. Shares of Nvidia exploded 28% higher on Thursday after reporting earnings and pointing to the growth potential of AI technologies.
The surge in Nvidia's stock price has also been fueled by the ongoing semiconductor shortage, which has caused supply chain disruptions and increased demand for high-end chips.
In addition to its AI plays, Nvidia has also been making strategic acquisitions to expand its product offerings. In April, the company announced its acquisition of UK-based semiconductor company Arm Holdings for $40 billion.
Nvidia's acquisition of Arm has faced regulatory scrutiny, with some industry experts expressing concerns about the potential consolidation of the semiconductor industry. However, Nvidia has emphasized that the acquisition will enable it to accelerate innovation and bring new products to market faster.
In conclusion, Nvidia's strong Q1 earnings and focus on AI technologies have propelled the company to new heights. The company's acquisition of Arm Holdings and development of its Grace data center CPU represent significant opportunities for growth and innovation. With the ongoing semiconductor shortage and increased demand for high-end chips, Nvidia's stock price is expected to continue to rise in the coming months.