Nvidia
might become the world’s first trillion-dollar chip stock. When it will reach that exalted level, though, is unclear.
Shares of Nvidia (ticker: NVDA) surged 24% on Thursday after an earnings and guidance release that has been described as “incredible,” “unfathomable,” and the “greatest beat of all time.”
That’s not hyperbole. Nvidia reported a first-quarter profit of $1.09 a share, ahead of forecasts for 92 cents, while offering second-quarter revenue guidance of $11 billion, nearly $4 billion more than the $7.15 billion consensus.
What’s more, the guidance boost doesn’t appear to be the result of a one-time surge in demand for chips with enough power to handle artificial intelligence. On the company’s earnings call, Nvidia Chief Financial Officer Colette Kress said, “Generative AI drove significant upside in demand for our products, creating opportunities and broad-based global growth across our markets,” and that the company was already taking steps to meet high demand during the second half of Nvidia’s fiscal year.
The strong demand should push gross margins above 70% during the second quarter, up from 66.8% during the first, which Susquehanna analyst Christopher Rolland attributes to the H100 card that can “speed up large language models…by an incredible 30X over the previous generation” and costs $20,000.
All told, Rolland says that Nvidia’s four segments—auto, data center, gaming, and professional visualization—could grow at a rate at least three times that of semiconductors generally. “It looks like the new gold rush is upon us, and Nvidia is selling all the picks and shovels,” Rolland writes. He upped his price target on the stock to $450 from $350.
The recent gains in both the stock and the business give Nvidia a chance to do something no chip company has done—cross $1 trillion in market capitalization.
Intel
(INTC), which slumped on Thursday, peaked at $501.51 billion in August 2000—$901.30 billion in today’s dollars—while
Taiwan Semiconductor Manufacturing
(TSM) peaked at $642.1 billion in January 2022. After Thursday’s gain, Nvidia is worth $939.3 billion, based on a share count of 2.473 billion. That puts it $60.7 billion away from the $1 trillion mark, a level that would be reached if the stock hits $404.86, more than 6% away from today’s close of $379.80.
It’s not just chip stocks that have had trouble hitting the $1 trillion mark. Just six U.S. stocks have crossed that threshold—
Apple
(AAPL), Amazon.com (AMZN), Alphabet (AMZN), Microsoft (MSFT), Meta Platforms (META), and
Tesla
(TSLA)—and Tesla and Meta weren’t able to stay there. Hitting $1 trillion is a big deal.
Needham analyst Rajvindra Gill saw that coming back in 2021, although it has been a bumpy ride since the call. Nvidia stock tumbled 50% last year as tech stocks got hammered by the Federal Reserve’s rising rates and slowing growth. But the demand for Nvidia’s products is coming from everywhere: Big Tech companies like
Microsoft,
Alphabet,
and
Amazon.com
; internet companies like
Meta
; and even biotech companies like
Amgen
(AMGN), to name a few.
“We see nearly all past headwinds behind us, and expect the company is shipping to true, AI-related demand, near-term,” writes Gill, who has a $460 price target on the stock. “While there [were] some peaks and valleys in the interim years, we believe NVDA is in a position to achieve that valuation over time.”
But how much higher can Nvidia really go? In the short term, perhaps not very far. Katie Stockton, founder of Fairlead Strategies, notes that the stock’s move higher on Thursday will generate sell signals on weekly and daily bases. “This suggests a short-term peak is likely in the long-term uptrend,” she writes.
But after that, who knows?
Write to Ben Levisohn at [email protected]
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