Nvidia stock tops $1,000 on strong earnings as AI demand cranks up
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Nvidia's CEO Jensen Huang said Wednesday that demand for generative artificial intelligence training is "accelerating," as the AI-chip designer posted quarterly earnings that beat market expectations.
Why it matters: Dubbed the most important stock on planet earth by Goldman Sachs, the company is the main bellwether for the pace of AI progress.
- "Training continues to scale as models learn to be multimodal — understanding text, speech, images, video and 3D and [learning] to reason and plan," Huang said.
Driving the news: Shares of Nvidia shot up over 4.4% in extended trading, and closed over $1,000 per share for the first time Thursday. Quarterly earnings and sales topped Wall Street estimates, and the AI giant announced a 10-for-1 stock split.
- Revenue topped $26 billion, up 18% from the prior quarter, while earnings were $6.12 adjusted.
- For the current quarter, the company now expects sales to top $28 billion, which also exceeded expectations.
- "We believe this earnings will act as a buoy for the market and sustain the broader market rally," Deiya Pernas, CFA and co-founder of Pernas Research, said in a note.
Behind the growth: The auto sector is expected to become Nvidia data centers' largest source of business this year, the company said.
- Brands including Tesla, BYD and Xiaomi are investing in self-driving tech, planning for new factories and stores, and developing new EV platforms, respectively.
- Big Tech platforms like Meta investing in AI assistants across its main apps — Facebook, Instagram, Messenger and WhatsApp — are also strong sources of growth.
- For Nvidia's newest Blackwell chip, executives on the earnings call name checked Amazon, Google, Microsoft, OpenAI, Oracle and Elon Musk's xAI as among early customers.
- Huang also said he's seeing "some 15,000, 20,000" generative AI startups in line, with customers "putting a lot of pressure on us to deliver."
The big picture: Businesses are racing one another to launch AI products and services, because timing is critical, Huang told analysts.
- "The next company who reaches the next major plateau gets to announce a groundbreaking AI and the second one after that gets to announce something that's you know, 0.3% better," he said.
- "So the question is do you want to be repeatedly the company delivering groundbreaking AI or the company delivering 0.3% better and that's the reason why this race as in all technology races is so important."
Nvidia already has a plan to capitalize on the urgency and anxiety of the AI race by expanding its business beyond chips.
- With its new NIM software platform which helps customers better use Nvidia chips, the company is trying to become "the AI ecosystem," like Apple has done with iOS, Paul Meeks, co-CIO of Harvest Portfolio Management, told CNBC in March following Nvidia's AI developer conference.
- "The nice thing about the software licensing model is there are no manufacturing costs. It's 100% gross margins, so pound for pound, it will be much more profitable."
The bottom line: "There's a lot of reasons why we're going to scale by easily a million times in the coming few years for good reasons and we're looking forward to it and we're ready for it," Jensen said.
