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Nvidia Corporation (NVDA) Stock Overheats on Earnings Beat

It looks like investor expectations just got overeager for NVDA stock


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Ahead of the second-quarter results for Nvidia Corporation (NASDAQ:NVDA), investors were certainly getting jittery. True, part of this was due to the overall bearishness in the markets. But there were likely concerns that NVDA stock may be due for profit-taking. For the year so far, the shares have logged a gain of about 54%.

Regarding Q2, the company reported earnings of 92 cents a share and a 56% spike in revenues to $2.23 billion. By comparison, the Street consensus was looking for 70 cents a share on NVDA stock and revenues of $1.96. It was actually the eighth straight quarterly beat.

Oh, and the guidance was good, too. The company put out a forecast on revenues of $2.35 billion, plus or minus 2%. But the consensus was for $2.13 billion.

So why the fall in NVDA stock? It’s hard to tell. But right now, Wall Street has been getting fairly demanding when it comes to growth companies. Essentially, for Nvidia stock, it appears that the bulls just wanted to see more on the top line.

Here are also some of the highlights of the quarter:

  • The company announced a large installation of Nvidia DGX AI supercomputers for Facebook Inc (NASDAQ:FB).
  • Toyota Motor Corp (ADR) (NYSE:TM) agreed to purchase the Nvidia DRIVE PX platform for its next-generation autonomous vehicles.
  • Nvidia introduced its cloud platform, which allows developers to create AI apps.
  • The company launched the Max-Q system, which provides for better gaming experiences on laptops.
  • Nvidia, in collaboration with Bungie and Activision Blizzard, Inc. (NASDAQ:ATVI), developed a PC version of Destiny 2.
  • The company launched Project Holodeck, which allows for photorealist VR experiences.

No doubt, the key to NVDA stock is the mega opportunity for artificial intelligence (AI). This is likely to represent one of the next transformative waves in the technology world. Just listen to the conference calls from companies like FB, Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc (NASDAQ:GOOGL) and, Inc. (NASDAQ:AMZN).They all note the strategic importance of AI to their businesses.

As for the market opportunity, International Data Corporation (IDC) has recently published an eye-catching report. It forecasts that global revenues for cognitive and AI systems will hit $12.5 billion this year, up 59.3% on a year-over-year basis. Actually, for the next three years, the compound annual growth rate is expected to be about 54.4%.

As for NVDA stock, it is at the sweet spot of this opportunity.  The company’s leadership in GPUs (Graphics Processing Units) is critical.  This type of technology is the right approach for AI since it allows for low-cost processing of huge amounts of data and can handle graphics-intensive applications.

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Article printed from InvestorPlace Media,

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