Nvidia (NASDAQ:NVDA) once again impressed the market with its Q1 earnings report. Nvidia stock exceeded estimates by $1.45 billion with a 262% revenue surge. The company’s data center sales increased by over 427% due to high AI demand.
Nvidia’s continued innovation, like the Blackwell GPU, could make it the leader in the industry.Nvidia expects Q2 revenue of $28 billion, driven by data center demand. With its dominant position in high-performance chips, it’s expected that most investors and analysts remain bullish.
If Nvidia can continue to out-innovate its peers (the Blackwell GPU is a great example of this), it really could be a one-horse race moving forward.
Here’s why I think Nvidia is still the stock to own long-term in the semiconductor sector.
Strong Fiscal Q1
May 22 was a blast for Nvidia as it announced a booming Q1 revenue ending April 28, 2024. Revenue was $26 billion, showing an 18% increase from the previous quarter and a 262% surge from 2023.
Non-GAAP EPS reached $6.12, 19% higher than the previous quarter. CEO Jensen Huang emphasized that the company is beginning its next industrial revolution. He highlighted Nvidia’s expanding plans for advanced accelerated computing and AI.
With its strong growth in data centers, Nvidia’s rising demand for generative AI will not stop anytime soon. AI will spread into various sectors shortly, including automotive, consumer internet, health care, and more. This will create new multibillion-dollar markets.
Nvidia unveiled the Blackwell platform for trillion-parameter-scale generative AI and Spectrum-X to introduce large-scale AI to Ethernet-only data centers.
Additionally, Nvidia announced a ten-for-one forward stock split to enhance stock accessibility for employees and investors.
Chinese Prices Decline
Nvidia’s latest AI chip for the Chinese market faced a sluggish start, priced below Huawei’s chip due to oversupply. These challenges are faced by Nvidia amid U.S. sanctions and stiff competition.
China contributes 17% of Nvidia’s revenue, adding caution for investors despite a recent revenue forecast.
The H20 chip, Nvidia’s flagship in China, faced oversupply, indicating weak demand compared to Huawei’s Ascend 910B.
Analysts noted Nvidia’s struggle to secure market share amid geopolitical tensions. China believes the AI industry will grow more by 2035.
During Nvidia’s Q1 report, management also notes on the decline in their China business segments due to restrictions and sanctions.
CFO Colette Kress highlighted decreased data center revenue, anticipating continued competition in the Chinese market.
Analysts emphasized the importance of H20 chip performance against Huawei’s Ascend 910B.
Huawei is expected to increase 910B chip shipments, surpassing H20 in key metrics. Despite limited data, Huawei showed more robust government procurement demand than Nvidia’s H20.
AI Chip Demand to Continue
Nvidia’s revenue surged by 262% in the last quarter, driven by record sales of AI chips. CEO Jensen Huang expressed optimism, anticipating significant revenue from the new Blackwell chips due to increasing demand for generative AI.
He outlined a continuous cycle of chip releases, aiming to sustain growth momentum. Demand for Nvidia’s AI data center GPUs remained robust as major tech firms prioritized building AI infrastructure for scalable products.
In March, Nvidia swiftly responded to the AI demand surge by introducing Blackwell chips, boasting twice the power for AI model training and five times faster inference.
This followed the Hopper chip release just a year earlier.
Analysts raised concerns about potential disruptions in Nvidia’s growth trajectory because of the shift to new products.
However, Nvidia’s Blackwell platform spearheaded the AI surge, propelling the company into a new growth phase.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
