by Investors still believe in the idea that Nvidia (NVDA) will have a very hot summer as it cleans up in the generative AI arms race with its performance edge in chips.
That’s even with growing geopolitical tensions between the US and China, which has new implications for technology.
Shares of the chip giant are up 3% year-to-date in July, beating Nasdaq Composite’s gains of 1.2%. Shares are now up as much as 200% year-over-year, helping the Jensen Huang-led tech creation reach a market cap of more than $1 trillion.
Nvidia initially hit the $1 trillion market cap level on May 30.
“We continue to see a $10 earnings per share benefit in [calendar year 2023] for Nvidia (versus consensus $7.49), with our scenario implying growth to $30 by 2027 (with only 20% acceleration),” Evercore ISI analyst CJ Muse wrote in a new customer note. with positive AI-related headlines driving continued momentum for stocks (and likely the [semiconductor sector index] SOX also higher).”
Nvidia is seen as the leader in the AI space because of the chips that power OpenAI’s ChatGPT platform. The company has also closed high-profile generative AI chip deals with ServiceNow (NOW) and Snowflake (SNOW).
Strong demand caused a significant upward reset of Nvidia’s expectations on May 24. Nvidia said it expects Q2 revenue to be about $11 billion, plus or minus 2%. Wall Street expected $7.2 billion.
The Street currently expects $11.02 billion in sales for Nvidia’s second quarter, according to data from Yahoo Finance.
Nvidia’s shocking outlook has Wall Street bracing for big, positive guidance from the company when it reports earnings on Aug. 23.
Analysts expect Nvidia to add $1 billion in revenue from the end of the second quarter to the end of the third quarter in October alone.
Despite the fundamental business momentum and investor love for the stock, Nvidia’s share price hasn’t been Teflon in recent weeks.
The company’s market cap fell below the $1 trillion mark following reports that the US plans to impose new restrictions on the shipment of AI chips to China. The reports suggest export restrictions could begin in July.
Nvidia CFO Colette Kress said at a conference in late June that the export restrictions “would result in a permanent loss of opportunity for US industry.”
However, analysts have stuck with the company and investors have pushed the valuation back above $1 trillion.
About 88% of sell-side analysts who follow Nvidia rate the stock a buy with an average price target of $470. If Nvidia reaches that price target, the company’s market cap would be around $1.24 trillion.
Pros say Nvidia is too lucrative a demand spot for investors to ignore the stock.
“However, the recent incremental increase in the company’s data center revenue outlook suggests that the company has entered a new phase of growth, driven by the emergence and spread of generative AI,” said Goldman Sachs analyst Toshiya Hari.
Brian Sozzi is the editor-in-chief of Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn. Tips on deals, mergers, activist situations or anything else? Email to brian.sozzi@yahoofinance.com
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