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With the Dow (^DJI) reaching 40,000 and the S&P 500 (^GSPC) and Nasdaq (^IXIC) also nearing new records, investors are looking for the next catalyst to continue the rally. maybe.
At just the right time, chip manufacturing giant Nvidia was called upon. The company's report comes fairly close to the end of its regular earnings season, nearly a month after its meta report.
And as the company's value inflates, Nvidia's performance will only become more important.
With a market capitalization of $2.3 trillion, it is currently the third-heaviest stock in the S&P 500, behind Microsoft and Apple. In what's called the Nvidiaverse, a number of semiconductor companies that compete with or serve Nvidia rise or fall with their stock prices.
Speaking of the company's stock, its performance this year has lagged the other so-called “Magnificent Seven” stocks. (I know, I know, I don't even call it that anymore.) But his Nvidia, which posted a dizzying 240% last year, will grow by another double in 2024. , is showing the third highest growth rate. It ranks high in the S&P 500 (behind Super Micro, another AI space, and Vistra, a power provider that is also riding the wave of his AI demand.)
So the pressure is on again. Another big beat could boost stock prices, but a failure could backfire.
And analysts generally think NVIDIA can meet or exceed these lofty expectations. Last quarter's revenue is expected to increase 242%, marking his third consecutive quarter of triple-digit year-over-year sales growth.
Taking a step back, Piper Sandler's Harsh Kumar noted in an earnings preview note that data center chips and software accounted for 83% of last quarter's revenue, driven primarily by demand for AI training. did.
Five years ago, NVIDIA had a market capitalization of less than $100 billion and was primarily known for making video game chips before riding the crypto mining wave (as recalled by my co-anchor Josh Lipton) walk along the path). The change was amazing. And in 2016, we were named Company of the Year.
Expectations may not be blown away this quarter, especially considering how much the stock has risen. Kumar wrote that even if the company's sales follow the trend of recent quarters and exceed $1.9 billion, the stock will likely be “flat to up.” “We expect the downside to be small compared to the large numbers of the past few quarters,” Citi's Atif Malik wrote.
But the one that really caught my attention with an even bigger number is KeyBanc's John Vinh. He expects data center revenues to reach $200 billion in calendar year 2025. This corresponds to an increase of 321% compared to 2023.
Consider how unusual it is for a company this big to grow this much. Tesla's sales increased by 387% in 2013, reaching just over $2 billion. Amazon hasn't experienced triple-digit growth since 1998, when sales rose 313% to $610 million.
In other words, Nvidia's scale for growth is almost unprecedented.
That's why, as stock prices continue to rise, investors continue to wonder, “How long will this situation last?”
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