Nvidia Stocks Explodes on Stellar Q4 Results and Positive AI Outlook

Feb 23, 2023
AI microprocessor on motherboard computer circuit, Artificial intelligence integrated inside Central Processors Unit or CPU chip, 3d rendering futuristic digital data technology concept background

Nvidia stock is flying high amid growing optimism about the chip giant’s artificial intelligence (AI) sales. After reporting better-than-expected quarterly results, the stock rallied by more than 14%, as the focus shifts toward AI chips. The optimism comes a day after Intel came under pressure after cutting its dividend to 16-year lows and affirming the impact of slowing personal computer sales.

Hype around AI Stocks

In the aftermath of OpenAI chatbot ChatGPT capturing people’s attention worldwide, companies with direct ties to artificial Intelligence have been the center of attention. Nvidia has benefited greatly from seeing its sentiments in the market increase significantly. There is growing expectation that it will be the one-stop shop for chips that other companies need to deploy artificial intelligence solutions and technologies.

According to Rosenblatt Securities analyst Hans Mosesmann, Nvidia’s exposure to AI technology is accelerating in a way that will have a significant disruptive impact. Additionally, it is poised to benefit greatly owing to its first-mover advantage as other chip giants like Intel try to play catchup.

Given the hype around artificial intelligence technology and innovation, it is hard for investors to shun Nvidia stock. The success of ChatGPT has attracted multibillion-dollar investments in revolutionary technology. Microsoft has already invested $10 billion in OpenAI as it looks to take advantage of the revolutionary technology in its search business. Likewise, investors want to be included, therefore, pilling investments in any company with exposure to the technology.

Nvidia Stellar Q4 Results

Nevertheless, Nvidia’s prospects are not 100% dependent on artificial Intelligence if its fourth-quarter financial results are anything to go by. The company delivered impressive results, with revenue topping $6 billion against the $6.02 billion analysts expected.

Adjusted earnings per share landed at 88 cents versus the 81 cents a share expected. The better-than-expected results were mostly driven by growth in its data center business. The chip giant expects first-quarter revenue to come in at $6.5 billion, affirming the underlying growth.

Wall Street expects giant graphics maker to register significant revenue growth amid growing demand for chips to power artificial intelligence platforms like ChatGPT and Google’s Bard. While the upcoming platforms require huge amounts of processing power, NVIDIA has proven to be up to task to provide the much-needed graphics cards.

Nvidia vs Intel

Growth in graphics cards to power AI innovation should help offset some of the losses that the company is experiencing in its gaming unit. Game business revenue in the fourth quarter was down by 51% year over year. Unlike in previous years, at the height of the pandemic, people are no longer clamoring for new gaming hardware and software, triggering a slowdown in the sector.

While Nvidia has always played second fiddle to Intel, the tables are slowly changing. Intel is facing a string of issues attributed to a slowdown in demand for personal computers. As a result, the company has had to undergo a restructuring characterized by cost-cutting measures.

In contrast, Nvidia has been growing in strength and becoming a market leader with its stock up by more than 30% for the year. More than a dozen analysts have already hiked their price target on the stock, affirming why it is the semiconductor industry’s future.