NVIDIA Stock Soars 580% on AI Boom in Recent Earnings

NVIDIA’s stellar 580% AI-driven profit surge in 2023 cements its role as a tech powerhouse, navigating challenges and fueling optimism for continued innovation and market leadership.

By Aatar Ata | Founder and Senior Author of Aatar X

4 min read — February 22, 2024

Artificial intelligence had a breakthrough year in 2023, and none of the companies profited from the trend more than Nvidia, a chip manufacturer.

Let’s dive deeper and understand why NVIDIA took the game!

Nvidia’s profits increased to about $12.3 billion in the three months ending January 28 from $1.4 billion in the same quarter last year, a boost of 769% year over year and even higher growth than Wall Street analysts had predicted, according to the company’s earnings, which were disclosed on Wednesday. The company’s full-year earnings increased by more than 580% over the previous year thanks in part to that outcome.

As it continues to ride the tide of enormous AI investment, Nvidia also reported fourth-quarter revenue increases of 265% year-over-year, topping analyst estimates once again.

“Demand is increasing globally throughout businesses, sectors, and countries,” CEO Jensen Huang stated in a statement on Wednesday. Huang likened the widespread deployment of AI technology to the beginning of a new industrial revolution during a conference call with analysts after the research was released.

Nvidia is essential to the developing field of AI. In terms of manufacturing processors for artificial intelligence systems, particularly generative AI—the newest, highly anticipated technology that produces text, graphics, and other types of media—the American chipmaker leads the world in this regard.

Dan Morgan, vice president of Synovus Trust Company, states that even though Microsoft, IBM, Amazon, Meta, and others have started to produce some of their chips, Nvidia still makes up around 70% of the market for AI semiconductors.

The company’s principal data center sector reported record-breaking fourth-quarter revenues of $18.4 billion, up 409% year on year, thanks mostly to agreements with big infrastructure companies such as Google, Amazon, and Cisco.

However, Nvidia’s stock price has risen dramatically over the previous year, with shares expected to increase by about 230% by 2023. This suggests that Nvidia is now a major participant in the bigger market as well. Goldman Sachs analysts referred to Nvidia as “the most important stock on planet earth” in research on Tuesday. In 2023, Nvidia was the best-performing stock in the S&P 500.

Following Wednesday’s announcement, Nvidia’s shares increased by almost 9% in after-hours trade.

Some investors, however, are concerned that rapid growth is unsustainable. Furthermore, US export limitations on advanced AI processors to China, imposed last year and affecting devices such as Nvidia’s H800 and A800 CPUs, jeopardize access to a big and quickly increasing market.

Although other sectors continued to contribute to the unit’s strong performance, the business reported that data center sales to China “declined significantly” in the January quarter due to the limits.

In an email remark before Wednesday’s release, Morgan stated, “However, if Nvidia does not find a long-term workaround to the restrictions, it could start to trickle down into future growth.”

During the results call, Nvidia executives stated that the business has started exporting non-restrictive chips to China already. According to CFO Colette Kress, China’s share of the company’s total data center business in the fourth quarter was in the mid-single digits, and this percentage is predicted to stay in that range in the current quarter.

Some on Wall Street think the firm still has a lot of space to grow, despite the China worries.

In a report earlier this week, Insider Intelligence senior analyst Gadjo Sevilla stated, “The outlook for Nvidia is positive as AI chip competition from Intel, AMD, Meta, and Microsoft could be months away while demand for Nvidia chips is only surging.”

During the call on Wednesday, Kress stated that the company’s sophisticated AI processors are still in high demand. “AI solutions are being developed and implemented in almost every industry.”

As the corporation enters this year, it may find it difficult to ensure that supply keeps up with the rapidly increasing demand. On the other hand, the business’s “cycle times are improving… Overall, our supply is growing rather nicely, according to Huang.

The business said on Wednesday that it expects sales for the current quarter to reach around $24 billion, which would be higher than Wall Street’s projections and a 233% rise over the same period last year.

A quick disclaimer, this report is conducted by CNN.