NVIDIA Corporation (NASDAQ:NVDA) is firing on all cylinders as the demand for its graphics chips that go into the latest video games, artificial intelligence (AI) applications and cryptocurrency mining rigs continues to rise.
In the middle of a global chip shortage, this fundamentally superior company saw record sales and earnings in the second quarter.
Second-quarter revenue soared 68% year-over-year to a record $6.51 billion, topping estimates for $6.33 billion. Earnings surged 89% year-over-year to $1.04 per share, compared to $0.55 per share in the second quarter of fiscal year 2021. Analysts were expecting earnings of $1.02 per share, so NVIDIA posted a 2% earnings surprise.
The company’s gaming revenue climbed to a new record high, rising to $3.06 billion, or by an 85% year-over-year increase. Its GeForce graphics cards and the chips designed for consoles, including Nintendo’s Switch, led sales.
Interestingly, NVIDIA’s latest gaming chips often sell out as soon as they hit the shelves, and resellers mark them well over the list price. Management noted the company expects supply issues for these chips will continue through the year, as supply chain backlogs continue to expand.
Revenue from its data center offerings, which include its AI-enabled chips for cloud providers and industry, came in at $2.37 billion, some 35% higher than a year prior and a new all-time record.
Cryptocurrency chips sales dipped 33% below expectations to $266 million, but CFO Colette Kress said the company now expects these chips will contribute little to future revenue streams for NVIDIA. More than 80% of the company’s graphics cards are modified so that they won’t be as useful for mining cryptocurrency in order to meet demand for the gaming applications.
CEO Jensen Huang also noted the company’s expansion into cutting edge fields including the immersive virtual worlds known as metaverses. Its metaverse tool, called Omniverse, has already attracted the attention of some 500 companies and over 50,000 creators, the company said.
Investors also have been following the company’s planned $40 billion acquisition of U.K.-based chipmaker ARM Holdings. NVIDIA’s competitors are opposing the deal on grounds they wouldn’t have access to ARM’s coveted smartphone chip technology, but the company said it expects regulators will ultimately approve the deal.
If allowed to finalize, it would represent the largest semiconductor deal in history and provide a huge boost to NVIDIA’s dominance in the sector, as well as investors’ portfolios.
Looking ahead, the company expects demand for its chips will keep climbing in the third quarter of fiscal year 2022, leading to revenue of about $6.8 billion, up from $4.73 billion in the same quarter in fiscal year 2021.
One of My Favorite Chip Stocks
NVIDIA has been one of my favorite semiconductor stocks for years. In fact, back in early 2019, Growth Investor subscribers sold the stock for nearly a 275% gain in only 33 months.
I recommended the stock again to Growth Investor subscribers in May 2019. So far this year, the stock is up 46%, compared to the S&P 500’s 17% gain and the NASDAQ’s 13% increase.
Personally, I think the sky is the limit for NVIDIA simply given its AI and graphic chips.
NVIDIA introduced the first graphics processing unit (GPU) in 1999, and it has more than 7,000 patents related to computer graphics. The company has been in the computer graphics business now for more than two decades, and as such, NVIDIA is at the forefront of accelerating AI with its proprietary GPUs.
Its AI technology is utilized in everything from data centers to the cloud to self-driving vehicles.
NVIDIA has also developed the world’s first portfolio of supercomputers that are built with AI. Its technology now supports 342 supercomputers, including 70% of all new systems.
For instance, the company recently unveiled its NVIDIA Base Command and Fleet Command software platforms that help deploy, develop and manage AI applications for enterprises and industrial clients.
Clearly, NVIDIA has a lot to boast about, and I suspect we’ll continue to see good news from NVIDIA for the foreseeable future.
The reality is AI is expected to be bigger than the tech boom in the 1990s and the smartphone revolution of 2007. It will allow us to build a whole new generation of incredible innovations.
In fact, Stephen Hawking predicted that AI would be the “biggest event in the history of our civilization,” and Google’s CEO called it “more important than electricity.”
And NVIDIA is perfectly positioned to benefit. It’s one of the reasons why I recommended the stock in Growth Investor back in May 2019. So, if you’d like to learn more about NVIDIA and why I like it, just sign up for my Growth Investor service. Once you do, you’ll have access to my special reports, including 3 Stocks Powering the $150 Trillion AI Boom, 3 Plays for the $12 Billion Battery Opportunity and The One AI Company Set to Corner the Booming Cybersecurity Industry.
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NVIDIA Corporation (NVDA)
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