tickers: NVDA

source: Benzinga

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Wall Street Sees Strong Rally in Technology Stocks Amid AI Hype

May 23, 2024 Wall Street has been experiencing a significant rally in technology stocks since early 2023, driven by the widespread adoption of artificial intelligence (AI). However, some technical and financial experts have expressed concerns that the AI space may be overhyped and could potentially lead to a bubble. Despite these concerns, NVIDIA Corp. (NVDA), a leading AI chipset company, has delivered impressive quarterly financial results that have exceeded expectations. In its first-quarter fiscal 2025 report, NVIDIA reported revenues of $26.04 billion, a 262% year-over-year increase, marking the third consecutive quarter with growth exceeding 200%. The company’s data center revenues soared 427% year-over-year to $22.6 billion, while gaming revenue increased by 18% to $2.65 billion. Additionally, professional visualization revenues and automotive sales reached $427 million and $329 million, respectively. These outstanding results can be attributed to the high demand for NVIDIA’s Hopper graphics processors, particularly the H100 GPU. Following the announcement, NVIDIA’s stock price rose by 6.1% in after-market trading, surpassing the $1,000 mark for the first time. One of the most significant signals from NVIDIA’s report is that customers using its high-end AI GPUs can expect an “immediate and strong return” on their investment. Approximately 45% of the company’s data center revenues come from major cloud providers such as Amazon Web Services, Microsoft Azure, Alphabet Cloud, and Oracle Cloud. CFO Colette Kress stated that a $1 investment in H100 by a cloud provider could generate $5 in revenues over the next four years. Furthermore, using NVIDIA’s latest HDX H200 chip, an API provider’s $1 investment can generate $7 in revenues over the same period. NVIDIA has also provided an impressive sales guidance for the fiscal second quarter, expecting revenues of $28 billion, surpassing the consensus estimate of $26.6 billion. CEO Jensen Huang highlighted the upcoming release of the company’s next-generation AI chip, Blackwell, which will be available in data centers in the fourth quarter of fiscal 2025. Huang stated, “We will see a lot of Blackwell revenue this year,” emphasizing the importance of these chips for customers’ interconnected infrastructure. NVIDIA, a global leader in visual computing technologies and the inventor of the GPU, has shifted its focus from PC graphics to AI-based solutions that support high-performance computing, gaming, and virtual reality platforms. Over the past five years, the company’s stock price has increased by 25 times. Looking ahead, NVIDIA is expected to benefit from the strong demand for its Hopper chips, driven by the widespread adoption of generative AI and the industry’s shift towards NVIDIA-made accelerators. However, despite an improving supply of NVIDIA chipsets, demand is likely to outpace supply, leading to potential price hikes for chips. The AI market is projected to experience significant growth in the coming decade, with estimates suggesting it will expand from its current size of $200-$300 billion to nearly $2 trillion by 2030. Despite the stock price of NVIDIA already surging by 210% in the past year and 92% year-to-date, the company’s impressive first-quarter fiscal 2025 results indicate that momentum is likely to continue. *Note: This article is for informational purposes only and does not constitute investment advice.