Tag: Meta Platforms

Investing in AI: Should You Bet on AMD, Broadcom, or NVIDIA?

Posted on by The INO.com Team

Is NVDA the Top Player in AI Stocks?

Initially famed for gaming GPUs, NVIDIA Corporation (NVDA) has evolved into a leader in data center hardware, spearheading AI advancement. The company’s Hopper GPUs are in high demand, accelerating AI applications from recommendation engines to natural language processing and generative AI large language models like ChatGPT on NVIDIA platforms. At this point, NVDA’s dominance in AI and data center markets is undeniable.

For the first quarter that ended April 28, 2024, Nvidia saw over 3x year-over-year increase to $26.04 billion, a new record level. NVIDIA’s Data Center Group (primarily connected to its AI operations) chalked up $22.60 billion in revenue, resulting in a 23% sequential gain and a massive 427% rise over the same period last year.

The chip giant’s operating income surged 690% from the year-ago value to $16.91 billion. NVIDIA’s non-GAAP net income amounted to $15.24 billion or $6.12 per share, compared to $2.71 billion or $1.09 per share in the previous year’s quarter, respectively.

Buoyed by a robust financial position, NVDA increased its quarterly dividend by 150% from $0.04 per share to $0.10 per share of common stock. The increased dividend is equivalent to $0.01 per share on a post-split basis and will be paid to its shareholders on June 28, 2024.

Moving forward, the company guided for a nice round of $28 billion in revenue for its second quarter of the fiscal year 2025, representing a projected 7.5% sequential gain. Its non-GAAP gross margin is expected to be 75.5%, plus or minus 50 basis points.

Analysts expect NVDA’s revenue for the fiscal 2025 second quarter (ending July 2024) to increase 109.7% year-over-year to $28.32 billion. The consensus EPS estimate of $6.35 for the current quarter indicates a 135.1% improvement year-over-year. Moreover, the company has an excellent earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.

Nvidia’s comprehensive offerings, from chips to boards, systems, software, services, and supercomputing time, cater to expanding markets and diversify its revenue streams. Moreover, the chipmaker’s shares have surged more than 130% over the past six months and nearly 190% over the past year. NVIDIA's trajectory suggests an unstoppable momentum fueled by AI adoption mirroring a similar upward curve, promising a bright future.

Amid this, do AI stocks Broadcom Inc. (AVGO) and Advanced Micro Devices, Inc. (AMD) stand a chance to be as big as the industry leader, NVIDIA? Let’s fundamentally analyze them to find the answer.

Broadcom Inc. (AVGO)

Broadcom Inc. (AVGO) is emerging as one of Nvidia's toughest rivals in the race for networking revenue, especially as data centers undergo rapid transformation for the AI era. As a global tech leader, AVGO designs, develops, and supplies semiconductor and infrastructure software solutions. The company produces custom AI accelerators for major clients and recently projected $7 billion in sales from its two largest customers in 2024, who are widely believed to be Alphabet Inc. (GOOGL) and Meta Platforms, Inc. (META).

AVGO will announce its fiscal 2024 second-quarter earnings on June 12. Forecasts indicate a 37.4% year-over-year revenue surge to $12 billion, reflecting steady growth and financial resilience. Moreover, analysts expect a 5% uptick in the company’s EPS from the preceding year’s period to $10.84.

Broadcom has consistently exceeded consensus revenue and EPS estimates in each of the trailing four quarters, including the first quarter. Its net revenue increased 34% year-over-year to $11.96 billion, with a triple-digit revenue growth in the Infrastructure Software segment to $4.57 billion. AVGO’s gross margin grew 22.8% from the year-ago value to $7.37 billion.

On top of it, the company’s non-GAAP net income for the three months came in at $5.25 billion or $10.99 per share, up 17.2% and 6.4% year-over-year, respectively. Also, its adjusted EBITDA increased from the prior-year quarter to $7.16 billion.

Looking ahead, the company forecasts nearly $50 billion in revenues for fiscal year 2024, with adjusted EBITDA projected to be approximately 60% of its revenue. The company anticipates a 30% year-over-year surge in networking sales, driven by accelerated deployments of networking connectivity and the expansion of AI accelerators in hyperscalers. It also expects generative AI to account for 25% of semiconductor revenue.

The artificial intelligence megatrend is poised to significantly drive Broadcom's revenue and earnings growth in the upcoming decade. During a recent earnings call, Broadcom CEO Hock Tan emphasized, “Strong demand for our networking products in AI data centers, as well as custom AI accelerators from hyperscalers, are driving growth in our semiconductor segment.”

On May 20, 2024, AVGO announced its latest portfolio of highly scalable, high-performing, low-power 400G PCIe Gen 5.0 Ethernet adapters to revolutionize the data center ecosystem. These products offer an enhanced, open, standards-based Ethernet NIC and switching solution to resolve connectivity bottlenecks as XPU bandwidth and cluster sizes grow rapidly in AI data centers.

Patrick Moorhead, CEO & chief analyst at Moor Insights and Strategy, noted, “As the industry races to deliver generative AI at scale, the immense volumes of data that must be processed to train LLMs require even larger server clusters. Scalable high bandwidth, low latency connectivity is critical for maximizing the performance of these AI clusters.”

He added, “Ethernet presents a compelling case as the networking technology of choice for next-generation AI workloads. The 400G NICs offered by Broadcom, built on its success in delivering Ethernet at scale, offers open connectivity at an attractive TCO for power-hungry AI applications.”

With the company's expanding presence in the AI space, Broadcom stands out as a compelling alternative to major chip companies such as NVDA and AMD. Over the past six months, shares of AVGO have gained more than 42%, and nearly 63% over the past year, making it an attractive addition to your investment portfolio.

Advanced Micro Devices, Inc. (AMD)

Advanced Micro Devices, Inc. (AMD) has been at the forefront of innovation in high-performance computing, graphics, and visualization technologies for decades. While NVDA may be the first name that comes to mind in AI processor sales, AMD has established itself as a formidable competitor in the GPU space, particularly excelling in chips tailored for AI workloads.

However, AMD's influence doesn't stop in hardware; it has been actively expanding its AI software ecosystem. The company recently unveiled the groundbreaking AMD Ryzen™ AI 300 Series processors, featuring the world’s most powerful Neural Processing Unit (NPU). These processors are designed to bring AI capabilities directly to next-gen PCs, promising a future where AI-infused computing is seamlessly integrated into everyday tasks.

Additionally, the next-gen AMD Ryzen™ 9000 Series processors for desktops solidify AMD’s position as a leader in performance and efficiency for gamers, content creators, and prosumers alike.

Moreover, the company’s comprehensive roadmap for the Instinct accelerator series promises an annual cadence of cutting-edge AI performance and memory capabilities across each generation. Beginning with the imminent release of the AMD Instinct MI325X accelerator in Q4 2024, followed by the anticipated launch of the AMD Instinct MI350 series powered by the new AMD CDNA™ 4 architecture in 2025, AMD is poised to deliver up to a 35x increase in AI inference performance compared to its previous iterations.

In the first quarter that ended March 30, 2024, AMD’s non-GAAP revenue increased 2.2% year-over-year to $5.47 billion. Both its Data Center and Client segments experienced substantial growth, each exceeding 80% year-over-year, fueled by the uptake of MI300 AI accelerators and the popularity of Ryzen and EPYC processors.

Moreover, the company’s non-GAAP operating income grew 3.2% from the year-ago value to $1.13 billion. Its non-GAAP net income and earnings per share rose 4.4% and 3.3% from the prior-year quarter to $1.01 billion and $0.62, respectively.

AMD expects its revenue in the second quarter of 2024 to be around $5.7 billion, with a projected growth of 6% year-over-year and 4% sequentially. Meanwhile, its non-GAAP gross margin is expected to be around 53%.

Street expects AMD’s revenue for the second quarter (ending June 2024) to increase 6.7% year-over-year to $5.72 billion. Its EPS for the ongoing quarter is projected to reach $0.68, registering a 17% year-over-year growth. Moreover, the company surpassed the consensus revenue estimates in each of the trailing four quarters.

While Nvidia’s Data Center segment reported a sales run rate of $90 billion in the last quarter alone, experts predict that the company could surpass the $100 billion mark in Data Center sales with this momentum. In contrast, AMD's recent guidance forecasts sales of $3.5 billion for its MI300 AI chips in 2024. There’s still a sizable gap between NVIDIA and AMD in AI revenue. To put things into perspective, NVDA's networking revenue alone is approximately four times larger than AMD's total AI chip sales.

Nonetheless, AMD is poised to drive AI innovation across various domains with a diverse portfolio spanning cloud, edge, client, and beyond. The stock has gained more than 55% and 39% over the past nine months and a year, respectively.

Bottom Line

With the global artificial intelligence (AI) market projected to soar from $214.6 billion in 2024 to $1.34 trillion by 2030 (exhibiting a CAGR of 35.7%), leading chip companies, including NVIDIA, Broadcom, and Advanced Micro Devices, are rapidly expanding their market presence, vying for a piece of the pie.

Given their solid fundamentals and promising long-term outlooks, NVDA, AVGO, and AMD appear in good shape to thrive in the foreseeable future. Thus, investors can place their bets on these stocks to garner profitable returns and capitalize on the upward curve of AI.

Why Nvidia’s Stock Split Could Drive Further Market Gains

Posted on by The INO.com Team

NVIDIA Corporation (NVDA) shares topped a record high of $1000 in a post-earnings rally. Last week, the company reported fiscal 2025 first-quarter results that beat analyst expectations for revenue and earnings, reinforcing investor confidence in the AI-driven boom in chip demand. Moreover, the stock has surged nearly 120% over the past six months and more than 245% over the past year.

Meanwhile, the chipmaker announced a 10-for-1 forward stock split of NVIDIA’s issued common stock, making stock ownership more accessible to employees and investors.

Let's delve deeper into how NVIDIA’s stock split decision could attract more investors and propel future gains.

The AI Chip Leader

NVDA’s prowess in AI and semiconductor technology has been nothing short of remarkable. Its GPUs (Graphics Processing Units) have become synonymous with cutting-edge AI applications, from powering self-driving cars and training and deploying LLMs to revolutionizing healthcare diagnostics and e-commerce recommendation systems.

Amid a rapidly evolving technological landscape, NVIDIA has consistently remained at the forefront, driving innovation and redefining industry standards. Led by Nvidia, the U.S. dominates the generative AI tech market. ChatGPT’s launch in November 2022 played a pivotal role in catalyzing the “AI boom.”

NVDA holds a market share of about 92% in the data center GPU market for generative AI applications. The company’s chips are sought after by several tech giants for their diverse applications and high performance, including Amazon (AMZN), Meta Platforms, Inc. (META), Microsoft Corporation (MSFT), Alphabet Inc. (GOOGL), and Tesla, Inc. (TSLA).

Nvidia surpassed analyst estimates for revenue and earnings in the first quarter of fiscal 2025, driven by robust demand for its AI chips. In the first quarter that ended April 28, 2024, NVIDIA’s revenue rose 262% year-over-year to $26.04 billion. That topped analysts’ revenue expectations of $24.59 billion. The company reported a record revenue from its Data Center segment of $22.60 billion, up 427% from the prior year’s quarter.

“Our data center growth was fueled by strong and accelerating demand for generative AI training and inference on the Hopper platform. Beyond cloud service providers, generative AI has expanded to consumer internet companies, and enterprise, sovereign AI, automotive and healthcare customers, creating multiple multibillion-dollar vertical markets,” said Jensen Huang, founder and CEO of NVDA.

“We are poised for our next wave of growth. The Blackwell platform is in full production and forms the foundation for trillion-parameter-scale generative AI,” Huang added. 

NVDA’s non-GAAP gross profit grew 328.2% from the year-ago value to $20.56 billion. The company’s non-GAAP operating income was $18.06 billion, an increase of 491.7% from the prior year’s quarter. Its non-GAAP net income rose 461.7% year-over-year to $15.24 billion.

Furthermore, the chipmaker reported non-GAAP EPS of $6.12, compared to the consensus estimate of $5.58, and up 461.5% year-over-year.

Nvidia’s Stock Split: A Strategic Move

Alongside an outstanding fiscal 2025 first-quarter earnings, NVDA announced a 10-for-1 stock split of its issued common stock. Nvidia’s decision to split its stock aligns with a broader trend among tech giants to make their shares more appealing to a wider range of investors, particularly retail investors. The chipmaker aims to democratize ownership and attract a vast investor base by breaking down the barrier of high share prices.

As more individual investors gain access to Nvidia’s shares post-stock split, we could see heightened trading activity and increased demand, potentially exerting upward pressure on its share prices. This strategic move reflects the confidence of NVIDIA’s management in its future growth trajectory and underscores its commitment to inclusivity in the investment landscape.

Bank of America analysts, led by Jared Woodward, head of the bank’s research investment committee, described the share split as “another large-cap tech pursuing shareholder-friendly policies” in a note to clients.

NVIDIA marks the fourth Magnificent Seven big tech companies to announce a stock split since 2022, following Google, Amazon, and Tesla’s efforts to make shares more accessible, according to Woodward and his team.

In recent years, as the share prices of several Big Tech companies surged past the $500 mark, it has become challenging for retail investors to buy shares. Consequently, these companies have been exploring ways to simplify the process for nonprofessional investors to buy in. BofA added, “Big Tech is going bite-sized” to lure retail investors, which might signal more market-beating returns.

Historical Data Suggests That Stock Splits Indicate a Bullish Outlook

Examining historical data on stock splits reveals a generally positive picture. While immediate post-split gains aren’t guaranteed, companies like Apple Inc. (AAPL) and Google have witnessed substantial appreciation in their share prices following splits. AAPL’s 4-for-1 stock split, which took effect in August 2020, primarily influenced investor sentiment and trading dynamics.

Following the split, Apple’s stock continued its upward trajectory, driven by solid performance in its core businesses, including iPhone sales, services revenue, and wearables. Throughout the latter half of 2020 and into 2021, its share price experienced significant appreciation, reaching new all-time highs.

Given NVIDIA’s robust fundamentals and leadership in AI and semiconductor technology, there’s reason to believe that its recent stock split could lead to similar outcomes.

BofA’s sell-side analysts have consistently been bullish on Nvidia shares, and following the first-quarter earnings release, they raised their lofty 12-month price target for the chip giant from $1,100 to $1,320. If the outlook proves accurate, Nvidia shares could surge by another 26%, and the stock split could support that bullish move, as per Bank of America’s reading of history.

“Splits have boosted returns in every decade, including the early 2000s when the S&P 500 struggled,” noted Woodard and his team. BofA’s research indicates that stocks have delivered 25% total returns within the 12 months following a stock split historically, compared to the S&P 500’s 12%.

Further, the bank highlighted that stock splits often ignite bullish runs, even in stocks that have been underperforming. For example, both Advanced Micro Devices, Inc. (AMD) and Valero Energy Corporation (VLO) experienced significant share price increases after announcing stock splits despite their prior poor performance. According to analysts, “Since gains are more common and larger than losses on average, splits appear to introduce upside potential into markets.”

However, it's essential to heed the standard caveat the Securities and Exchange Commission (SEC) provided: “Past performance is not indicative of future results.” In line, Bank of America emphasized that “outperformance is no guarantee” after a stock split. Companies still witness negative returns 30% of the time following a split, with an average decline of 22% over the subsequent 12 months.

The analysts noted, “While splits could be an indication of strong momentum, companies can struggle in a challenging macro environment.” They pointed to companies like Amazon, Google, and Tesla that faced difficulties in the 12 months following their stock splits in 2022 due to a high interest-rate environment.

Bottom Line

NVDA has a significant role as a global leader in AI and semiconductor technology, with its GPUs driving innovations across numerous industries, such as tech, automobile, healthcare, and e-commerce. Nvidia’s fiscal 2025 first-quarter results suggest that demand for its AI chips remains robust.

Statista projects the global generative AI market to reach $36.06 billion in 2024. This year, the U.S. is expected to maintain its position as the leader in AI market share, with a total of $11.66 billion. Further, the market is estimated to grow at a CAGR of 46.5%, resulting in a market volume of $356.10 billion by 2030. The AI market’s bright outlook should bode well for NVDA.

The company also recently made headlines with its announcement to undergo a 10-for-1 stock split. While stock splits generally do not change the fundamental value of a company, they make its shares more accessible and attractive to retail investors. So, the recent stock split could significantly increase retail participation, driving heightened trading activity and potentially exerting upward pressure on Nvidia’s share prices.

Historically, stock splits generally indicate a positive impact on stock performance. Companies like AAPL, GOOGL, and AMD experienced substantial price appreciation after stock splits, with enhanced accessibility to retail investors driving higher demand and liquidity.

However, it is crucial to acknowledge that past performance is not indicative of future results. While stock splits can signal strong price momentum, they do not guarantee outperformance.

In conclusion, Nvidia’s stock split will likely attract more retail investors, potentially boosting increased trading activity and stock price appreciation. Coupled with the company’s strong position in the AI and semiconductor markets, the stock split could facilitate further growth, aligning with historical trends of positive post-split performance.

Why Nvidia's Stock Surge Could Translate to Higher Dividends

Posted on by The INO.com Team

With a $2.35 trillion market cap, NVIDIA Corporation (NVDA) has had an exceptional year so far. Following a stellar 2023, NVDA’s stock has already surged nearly 92% since January. Moreover, the stock has gained over 200% in the past year.

This surge in NVIDIA has been fueled by its explosive growth in the AI and data center markets, making it one of the most talked-about and desirable stocks. With a high of just under $955 in yesterday’s session, expectations are mounting for the stock to hit four digits soon.

Ahead of Nvidia’s earnings, Stifel analyst Ruben Roy increased his price target on the stock from $910 to $1,085, citing that he expects Nvidia to again surpass expectations on the top and bottom lines and raise its guidance for the next quarter.

The company’s results have been bolstered by solid demand for its chips from hyperscalers, including Amazon (AMZN), Alphabet Inc. (GOOGL), Meta Platforms, Inc. (META), Microsoft Corporation (MSFT), and others. As a result, the first-quarter earnings report will serve as a crucial gauge of the industry’s appetite for further AI investment.

Also, Bank of America analyst Vivek Arya raised his price target on NVDA stock from $925 to $1100 while maintaining a “Buy” rating.

Let’s analyze how Nvidia’s stock price appreciation could lead to higher dividend payouts.

Dominance in AI and Data Center Markets

The U.S., led by NVIDIA, dominates the generative AI (GenAI) tech market. With the launch of ChatGPT in November 2022, the rise of GenAI gained substantial momentum.

From consumer-facing applications, foundational technology such as large language models (LLMs), cloud infrastructure, and semiconductors crucial for operations, U.S. companies hold a market share ranging from 70% to an impressive 90% across several segments of the generative AI landscape.

According to Statista, the global generative AI market is expected to reach $36.06 billion in 2024. Further, the market is projected to grow at a CAGR of 46.5%, resulting in a market volume of $356.10 billion by 2030. In global comparison, the U.S. is estimated to have the largest market share, totaling $11.66 billion this year.

Moreover, NVDA, a leading tech player, commands a market share of around 92% in the data center GPU market for GenAI applications.

Nvidia’s success extends beyond its cutting-edge semiconductor performance, owing to its software capabilities. The widely adopted CUDA development platform, introduced in 2006, has become a fundamental tool for AI development, amassing a user base of more than 4 million developers.

The company’s chips are essential in powering technology like Google’s Gemini and OpenAI’s ChatGPT. Also, META has placed a sizable order of 350,000 H100 GPU graphics cards from Nvidia. In line, MSFT has spent billions of dollars buying chips from the chipmaker.

Unveiled New Generation AI Graphics Processors

In March 2024, NVDA announced its next-generation chip architecture named Blackwell and related products, including its latest AI chip, B200. The latest GPUs are expected to dramatically boost developers’ ability to build advanced AI models.

The new GPU platform succeeds the company’s Hopper architecture, which was launched two years earlier and helped send NVDA’s business and stock surging.

Blackwell GPUs, containing 208 billion transistors, can enable AI models to scale up to 10 trillion parameters. It will be incorporated in Nvidia’s GB200 Grace Blackwell Superchip, which connects two B200 Blackwell GPUs to a Grace CPU.

The new AI chips are expected to ship later this year.

“Generative AI is the defining technology of our time,” said Nvidia CEO Jensen Huang during a keynote address at the company’s developers conference in San Jose, California. “Blackwell GPUs are the engine to power this new industrial revolution. Working with the most dynamic companies in the world, we will realize the promise of AI for every industry.”

With Blackwell’s superior performance, the chipmaker aims to solidify its dominance in the data center GPU market.

Outstanding Fourth-Quarter Financials

For the fourth quarter that ended January 28, 2024, NVDA’s revenue increased 265.3% year-over-year to $22.10 billion. That exceeded analysts’ expectations of $20.55 billion. It reported a record revenue from the Data Center segment of $18.40 billion, up 409% from the prior year’s period.

“Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries and nations,” said Jensen Huang.

He added, “Our Data Center platform is powered by increasingly diverse drivers — demand for data processing, training and inference from large cloud-service providers and GPU-specialized ones, as well as from enterprise software and consumer internet companies. Vertical industries — led by auto, financial services and healthcare — are now at a multibillion-dollar level.

The chipmaker’s gross profit was $16.79 billion, an increase of 338.1% year-over-year. Its non-GAAP operating income rose 563.2% year-over-year to $14.75 billion. Its non-GAAP net income grew 490.6% from the previous year’s quarter to $12.84 billion.

Also, Nvidia posted non-GAAP earnings per share of $5.16, compared to the analysts’ estimate of $4.63, and up 486% year-over-year.

NVDA’s non-GAAP free cash flow was $11.22 billion, up 546.1% from the previous year’s period. The company’s total current assets were $44.35 billion as of January 28, 2024, compared to $23.07 billion as of January 29, 2023.

“Fundamentally, the conditions are excellent for continued growth” in 2025 and beyond, Huang told analysts. He noted that the robust demand for the company’s GPUs is expected to persist, fueled by the adoption of generative AI and an industry-wide shift from central processors to Nvidia’s accelerators.

Further, NVIDIA predicts revenue of $24 billion for the first quarter of fiscal 2025. The company’s non-GAAP gross margin is anticipated to be 77%.

Potential for Increased Dividend Payouts

As Nvidia's revenue and profits soar significantly, the company will likely consider increasing its dividend payouts, benefiting long-term investors. NVIDIA paid its quarterly cash dividend of $0.04 per share on March 27 to shareholders of record on March 6. The company’s annual dividend of $0.16 translates to a yield of 0.02% at the current share price.

Currently, Nvidia's dividend yield is modest compared to its tech peers, but its substantial cash flow and strong balance sheet provide ample room for growth. By increasing dividends, the company can attract a broader base of income-focused investors, further supporting its stock price.

Bottom Line

NVDA’s remarkable rise so far this year can be attributed to its dominance in the AI and data center markets, fueled by the growing demand for its chips from tech giants such as Amazon, Google, Meta, Microsoft, and more.

Moreover, Nvidia’s recent announcement of its next-generation chip architecture, Blackwell, and related products demonstrates its commitment to innovation and maintaining its competitive edge. With Blackwell's superior performance, Nvidia aims to consolidate its dominance in the data center GPU market.

Analysts are highly optimistic about the chipmaker’s prospects. Analysts expect NVDA’s revenue and EPS for the fiscal 2025 first quarter (ended April 2024) to increase 242% and 411.9%year-over-year to $24.59 billion and $5.58, respectively. Also, the company topped consensus revenue and EPS estimates in all four trailing quarters, which is impressive.

As NVDA continues to expand its market share and generate higher revenue and profit, the company naturally accumulates more cash reserves. With ample cash in hand, it can increase its dividend payouts without compromising its ability to fund ongoing operations or invest in future growth opportunities.

Increased dividends will be a positive signal to the market, reflecting Nvidia’s confidence in its long-term prospects and its commitment to returning value to shareholders. This move can also enhance investor sentiment, particularly among those looking for stable income streams in addition to capital appreciation.

In conclusion, NVDA stands at the forefront of the tech industry, driving innovation and shaping the future of AI. Given its outstanding financial performance, technological leadership, and potential for dividend growth, Nvidia is an attractive investment opportunity for long-term investors.

Top Tech Stocks for Buying Amid S&P 500's Surge

Posted on by The INO.com Team

Recently released data from the personal consumption expenditures (PCE) price index revealed that inflation increased in March. The core PCE price index, which excludes energy and food prices, went up by 0.3% last month, reaching an annual rate of 2.8% (unchanged from February). That was above the 2.7% estimate from the Dow Jones consensus.

George Mateyo, chief investment officer at Key Wealth, cautioned against assuming that inflation concerns have completely dissipated and that the Federal Reserve will imminently cut interest rates. He said, “The prospects of rate cuts remain, but they are not assured, and the Fed will likely need weakness in the labor market before they have the confidence to cut.”

Meanwhile, consumers continued to spend despite the elevated price levels. Personal spending increased by 0.8% for the month, slightly surpassing the 0.7% estimate. Personal income increased by 0.5%, aligning with expectations and exceeding the 0.3% rise in February.

The S&P 500 index capped off its best week since November as it rose around 2.7% to snap its streak of three straight weekly losses, while the tech-heavy Nasdaq Composite gained 4.2%, marking its first positive week in five. The broad market index is currently up more than 7% year-to-date. Stocks have surged lately as Big Tech names rallied on solid earnings and traders closely analyzing the latest inflation data.

Mona Mahajan, senior investment strategist at Edward Jones, noted, “We are finishing a volatile week on a strong note. It’s nice to see some green on the screen. Clearly one of the drivers has been the stellar reports coming out of megacap technology.”

Tech giants, including Microsoft Corporation (MSFT), NVIDIA Corporation (NVDA), and Alphabet Inc. (GOOGL), reported impressive earnings lately, and the message conveyed to Wall Street is simple and straightforward: enterprise spending on A will likely remain steady in the foreseeable future.

GOOGL soared over 10% on better-than-expected first-quarter earnings, marking its best day since July 2015. Additionally, the company announced its first-ever dividend payable to its shareholders on June 17, 2024, and a $70 billion buyback. Meanwhile, Microsoft gained nearly 2% after reporting robust fiscal third-quarter results, with a notable growth in its cloud business.

Let’s delve deeper into the fundamentals and growth prospects of MSFT, NVDA, and GOOGL:

Microsoft Corporation (MSFT)

One of the most popular and sought-after software companies, Microsoft Corporation (MSFT), barely requires any introduction. It has a market capitalization of whooping $2.99 trillion.

With a strong foothold in the cloud, the tech giant continues to pursue innovations in the artificial technology (AI) front, with AI-powered Bing and Microsoft 365 Copilot. Moreover, the partnership with ChatGPT creator OpenAI has given MSFT another edge over its competitors.

On April 23, the company introduced Phi-3-mini, a lightweight AI model aimed at broadening its client base with cost-effective options. Phi-3-mini is immediately available on Microsoft’s Azure cloud platform, Hugging Face’s machine learning model platform, and Ollama for local machine deployment.

On the same day, MSFT announced a five-year strategic partnership with The Coca-Cola Company (KO) to accelerate AI transformation enterprise-wide and across its global network of independent bottlers. In addition, on April 22, Cognizant Technology Solutions Corporation (CTSH) announced a partnership with MSFT to expand the adoption of generative AI in the enterprise and realize strategic business transformation.

In the same month, the company also expanded its work with G42 to accelerate responsible AI innovation in the United Arab Emirates and beyond while accelerating digital transformation securely across the Middle East, Central Asia, and Africa with expanded access to services and technologies.

Given the AI boom, such strategic partnerships make it a contender in the high-growth segments of the tech market that matter.

Driven by its Intelligent Cloud revenue with a 21% increase, the company posted impressive earnings for the third quarter that ended March 31, 2024. MSFT’s total revenue increased 17% year-over-year to $61.86 billion. Thanks to the booming demand for its cloud solutions, the company’s Cloud revenue surged 23% year-over-year to $35.10 billion.

"Microsoft Copilot and Copilot stack spanning everyday productivity, business process and developer services to models, data and infrastructure are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry," chief executive officer Satya Nadella said in a statement, referring to Microsoft’s AI services.

Further, Microsoft’s operating income rose 23.4% from the year-ago value to $27.58 billion. Its net income and earnings per share came in at $21.94 billion and $2.94, up 19.9% and 20% year-over-year, respectively. In addition, the company’s cash inflow from operating activities grew 30.6% from the prior year’s period to $31.92 billion.

Looking ahead, Street expects MSFT’s revenue and EPS to rise 14.6% and 8.5% year-over-year to $64.42 billion and $2.92 in the fourth quarter ending June 2024, respectively. It’s no surprise that the company has topped the consensus revenue and EPS estimates in each of the four trailing quarters.

Moreover, Microsoft boasts an impressive trailing-12-month ROCE and net income margin of 38.49% and 36.43%, significantly higher than the industry averages of 3.36%and 2.64%, respectively. Also, the stock’s trailing-12-month gross profit margin of 69.89% is 43.6% higher than the 48.66% industry average.

Shares of MSFT continue to shine this year, following robust third-quarter 2024 earnings. The stock has gained nearly 7% year-to-date and more than 36% over the past year.

NVIDIA Corporation (NVDA)

Having originated in designing GPUs for consumer gaming, NVIDIA Corporation (NVDA) has shifted its focus to making hardware for data centers, and it is at the forefront of enabling AI capabilities for a broad range of applications. Its market capitalization stands at $2.19 trillion.

While gaming remains a core market for NVDA, its reach extends far beyond. Given the rapidly evolving technological landscape, the company has leveraged its expertise in chip design and computing power to stay at the forefront of emerging trends and capitalize on new market opportunities.

Recently, the company announced that SEA.AI Linz, an Austria-based start-up and its Metropolis partner, would use AI and machine vision technology powered by NVIDIA's Jetson edge AI platform to enhance safety in sea travel by quickly detecting and alerting operators to potential hazards.

On April 25, the company posted that a line-up of NVIDIA automotive partners unveiled their latest offerings (at Auto China), powered by NVIDIA DRIVE, the leading platform for AI-driven vehicles. It also stated that several automakers are developing next-generation vehicles using NVIDIA DRIVE Orin.

Also, on April 24, NVDA announced its acquisition of Run:ai, a provider of GPU orchestration software, in a move to enhance the efficiency of AI computing resources. Run:ai, an Israeli start-up, specializes in Kubernetes-based workload management, enabling efficient cluster resource utilization for AI workloads across shared accelerated computing infrastructure.

Through this platform, enterprise customers can effectively manage and optimize their compute infrastructure, spanning on-premises, cloud, and hybrid environments.

NVDA's fourth quarter saw over 3x year-over-year increase to $22.10 billion, resulting in a 22% gain versus the previous quarter. Its Data Center group chalked up $18.40 billion in revenue for the quarter, resulting in a 27% sequential gain and a massive 409% lift over the same period last year. NVIDIA’s Data Center business (primarily connected to its AI operations) is among its highest-margin businesses.

NVIDIA’s founder and CEO, Jensen Huang, believes that accelerated computing and generative AI have hit a “tipping point,” with broad-based demand observed in the market. He added that the demand for data processing, training, and inference from large cloud-service providers and GPU-specialized ones, as well as from enterprise software and consumer internet companies, have been the driving force for the Data Center unit.

Moreover, the company’s non-GAAP operating income and non-GAAP net income grew significantly from the prior year period (and each 28% up quarter-over-quarter) to $14.75 billion and $12.84 billion, respectively. Its non-GAAP EPS came in at $5.16, compared to $0.88 in the prior year’s quarter.

Per its financial guidance, NVIDIA expects net revenue to be $24 billion for the first quarter of fiscal 2025, representing a projected 9% sequential gain. Its non-GAAP gross margin is expected to be at 77%.

Analysts expect NVDA’s revenue and EPS for the first quarter (ending April 2024) to increase substantially by 238.4% and 407.9% year-over-year to $24.34 billion and $5.54, respectively. Additionally, the company surpassed consensus revenue estimates in each of the trailing four quarters, which is impressive.

The stock’s trailing-12-month ROCE, ROTC, and ROTA of 91.46%, 46.75%, and 45.28% are significantly higher than the industry averages of 3.36%, 2.32%, and 1.29%, respectively. Also, its trailing-12-month net income margin of 48.85% compares to the industry average of 2.64%.

Moreover, the shares of the GPU giant have returned more than 117% over the past six months and nearly 77% year-to-date.

Alphabet Inc. (GOOGL)

With a market cap of $2.15 trillion, Alphabet Inc. (GOOGL) is known for its pioneering internet-related services and products. Amidst the rise of generative artificial intelligence, Google's parent company is making notable advancements, as indicated by its escalating capital expenditures and aggressive moves in artificial intelligence.

Alphabet CEO Sundar Pichai attributed the company’s significant success to its investments in AI, including the large language model and suite of AI products, including Gemini.

“We are well under way with our Gemini era and there’s great momentum across the company. Our leadership in AI research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation,” Pichai said.

On April 23, GOOGL announced a €600 million ($642.98 million) investment plan for a new data center in Groningen, Netherlands, to create 125 job opportunities. This investment contributes to the company’s cumulative investment in Dutch data infrastructure, which has exceeded €3.80 billion ($4.07 billion) since 2014.

In the fiscal 2024 first quarter ended March 31, 2024, GOOGL reported revenues of $80.54 billion, up 15.4% year-over-year. Its income from operations grew 46.3% from the prior year’s quarter to $25.47 billion. Net income and earnings per share came in at $23.33 billion and $1.89, representing increases of 57.2% and 61.5% year-over-year, respectively.

In addition, the tech company’s cash and cash equivalents amounted to $24.49 billion as of March 31, 2024, compared to $24.05 billion as of December 31, 2023.

Street expects GOOGL’s revenue and EPS for the fiscal second quarter (ending June 2024) to increase 12.5% and 27.5% year-over-year to $83.90 billion and $1.84, respectively. Also, the company has topped the consensus EPS and revenue estimates in all four trailing quarters.

Besides, GOOGL’s trailing-12-month gross profit margin of 57.47% is 16.9% higher than the 49.13% industry average. Likewise, the stock’s trailing-12-month net income margin, ROCE, and ROTC of 25.90%, 29.76%, and 19.82% compare to the industry averages of 2.53%, 2.86%, and 3.28%, respectively.

GOOGL’s stock has climbed over 35% over the past six months and is up nearly 18% year-to-date.

Bottom Line

Judging from the recent strategic initiatives, it’s clear that the tech giants have been investing heavily in artificial intelligence (AI). These investments reflect their recognition of the importance of AI in driving innovation, improving products and services, and staying competitive in the rapidly evolving tech landscape.

With Microsoft’s Copilot and Google’s Gemini, big companies such as Meta Platforms, Inc. (META) and c are joining the race to make sure they keep up with AI and don’t miss out on the vast market that could be worth more than $1 trillion in the next ten years.

Moreover, the tech landscape remains a bright spot, with more and more people engaging in online activities, ranging from remote working and online learning to entertainment and shopping. Plus, the rapid adoption of cloud computing, big data, the Internet of Things (IoT), virtual reality, machine learning, digital communication, blockchain, and 5G technology will continue to push the industry forward.

Lately, Big Tech stocks have played a crucial role in driving the S&P 500 to notch its best week since November, contributing to market optimism despite lingering inflation concerns. Amid the S&P’s surge, top-performing tech stocks MSFT, NVDA, and GOOGL could be wise additions to your portfolios for potential gains.

How Investors Can Seize Opportunities in NVDA Amid Market Volatility

Posted on by The INO.com Team

According to Todd Gordon, the founder of Inside Edge Capital, NVIDIA Corporation (NVDA) is a strong buy despite a recent pullback. The chart analyst also set a target price of $1,150 for the stock.

“I say that NVDA is just resting its legs gearing up for another move, but this time it's bringing more friends along for the run. There are quite a few different names in the semi-industry setup in a similar fashion telling me that once again the chips are ready to rip,” Gordon said.

Moreover, on March 13, Bank of America maintained its buy rating on NVDA and raised its price target from $925 to $1,100. As per BofA analyst Vivek Arya, Nvidia is expected to dominate the $90 billion accelerator market in 2024, unaffected by Google’s new CPU launch.

Last month, CNBC’s Jim Cramer suggested investors welcome an impending pullback. “I think people are right to expect a pullback here,” Cramer said. “But that’s not a reason to head for the hills. Instead, you want to raise a little cash, watch the market broaden — as it is doing — and then buy your favorite tech stocks when they come down.”

In Particular, Cramer said there may be an attractive opportunity to invest in one of his favorite stocks, NVDA. He hinted at his continued support for the tech giant over the years, even when the stock witnessed significant losses. While some on Wall Street might be growing weary of AI, Cramer emphasized that the future “runs on Nvidia.”

“If you don’t own Nvidia already, you know what? You’re about to get a sale,” he stated. “And if you do own it already, just stick with it, because it’s way too hard to swap out and then swap back in at the right level.”

Shares of NVDA have surged more than 75% year-to-date and nearly 223% over the past year. However, the stock has plunged around 3% over the past month.

Now, let’s discuss in detail factors that could influence NVDA’s performance in the near term:

Fourth-Quarter Beat on Revenue and Earnings

The chip giant reported fourth-quarter 2024 earnings that beat analysts’ expectations. For the quarter that ended January 28, 2024, NVDA’s non-GAAP revenue came in at $22.10 billion, surpassing analysts’ estimate of $20.55 billion. This compared to revenue of $6.05 billion in the same quarter of 2022.

The company posted a record revenue from the Data Center segment of $18.4 billion, up 409% from the year-ago value. NVIDIA achieved significant progress in this business segment. In collaboration with Google, NVDA launched optimizations across its data center and PC AI platforms for Gemma, Google’s groundbreaking open language models.

Further, the company expanded its partnership with Amazon Web Services (AWS) to host NVIDIA® DGX™ Cloud on AWS.

Regarding technological innovations, NVIDIA introduced several groundbreaking solutions, including NVIDIA NeMo™ Retriever. It is a generative AI microservice that enables enterprises to connect custom large language models with enterprise data, delivering highly accurate responses for various AI applications.

Additionally, NVIDIA launched NVIDIA MONAI™ cloud APIs, facilitating the seamless integration of AI into medical-imaging offerings for developers and platform providers.

The company’s Gaming revenue for the quarter was $2.90 billion, up 56% year-over-year. Talking about recent developments in the Gaming division, NVIDIA launched GeForce RTX™ 40 SUPER Series GPUs, starting at $599, featuring advanced RTX™ technologies such as DLSS 3.5 Ray Reconstruction and NVIDIA Reflex for enhanced gaming experiences.

The company also introduced microservices for the NVIDIA Avatar Cloud Engine, enabling game and application developers to integrate state-of-the-art generative AI models into non-playable characters, enhancing immersion and interactivity in virtual worlds.

NVIDIA’s non-GAAP operating income increased 563.2% year-over-year to $14.75 billion. Also, the company’s non-GAAP net income grew 490.6% from the previous year’s period to $12.84 billion. It reported non-GAAP earnings per share of $5.16, compared to the consensus estimate of $4.63, and up 486% year-over-year.

Furthermore, the company’s non-GAAP free cash flow was $11.22 billion, an increase of 546.1% from the previous year’s quarter. Its total current assets stood at $44.35 billion as of January 28, 2024, compared to $23.07 billion as of January 29, 2023.

During a call with analysts, Nvidia CEO Jensen Huang addressed investor concerns regarding the company's ability to sustain its current growth or sales levels throughout the year.

“Fundamentally, the conditions are excellent for continued growth” in 2025 and beyond, Huang told analysts. He added that the continued demand for the company’s GPUs would persist, driven by the adoption of generative AI and an industry-wide shift from central processors to Nvidia's accelerators.

For the first quarter of fiscal 2025, NVIDIA expects revenue of $24 billion. The company’s non-GAAP gross margin is expected to be 77%.

Recent Announcement of AI Chips During Nvidia GTC AI Conference

NVDA announced a new generation of AI chips and software tailored for running AI models during its developer's conference at SAP Center on March 18 in San Jose, California. This announcement underscores the chipmaker’s efforts to solidify its position as the go-to supplier for AI companies.

The new generation of AI graphics processors is named Blackwell. The first Blackwell chip is the GB200 and is anticipated to ship later this year. It will also be available as an entire server called the GB200 NVLink 2, combining 72 Blackwell GPUs and other Nvidia parts designed to train AI models. NVIDIA is enticing customers by offering more powerful chips to spur new orders.

The announcement comes as companies and software makers still scramble to get their hands on the current “Hopper” H100s and similar chips.

“Hopper is fantastic, but we need bigger GPUs,” Nvidia CEO Jensen Huang said at the company’s developer conference.

Further, the tech giant unveiled revenue-generating software called NIM, which stands for Nvidia Inference Microservices, to its Nvidia enterprise software subscription. NIM simplifies using older Nvidia GPUs for inference or running AI software and will enable companies to leverage the hundreds of millions of Nvidia GPUs they already own.

According to Nvidia executives, the company is transitioning from primarily being a mercenary chip provider to becoming more of a platform provider, like Microsoft Corporation (MSFT) or Apple Inc. (AAPL), on which other firms can build software.

Analysts at Goldman Sachs retained a buy rating of NVDA stock and raised their price target to $1,000 from $875. They expressed “renewed appreciation” for Nvidia’s innovation, customer and partner relationships, and vital role in the generative AI space after the company’s keynote.

“Based on our recent industry conversations, we expect Blackwell to be the fastest ramping product in Nvidia’s history,” the analysts said. “Nvidia has played (and will continue to play) an instrumental role in democratizing AI across many industry verticals.”

Bottom Line

NVDA surpassed Wall Street’s estimates for earnings and sales in the fourth quarter of fiscal 2023. The chipmaker has significantly benefited from the recent technology industry obsession with large AI models, which are developed on its pricey graphics processors for servers.

Moreover, sales reported in the company’s Data Center business comprise most of its revenue. NVDA’s Data Center platform is driven by diverse drivers like demand for data processing, training and inference from large cloud-service providers, GPU-specialized ones, enterprise software, and consumer internet companies.

Further, vertical industries, led by automotive, financial services, and healthcare, are now at a multibillion-dollar level.

The data center GPU market is projected to be worth more than $63 billion by 2028, growing at a staggering CAGR of 34.6% during the forecast period (2024-2028). The increasing adoption of data center GPUs in enterprises should bode well for NVDA.

Analysts expect NVDA’s revenue and EPS for the fiscal 2025 first quarter (ending April 2024) to increase 237.7% and 405.9% year-over-year to $24.29 billion and $5.51, respectively. Moreover, the company has topped consensus revenue and EPS estimates in all four trailing quarters, which is remarkable.

Furthermore, for the fiscal year ending January 2025, the company’s revenue and EPS are expected to grow 83% and 92.1% from the prior year to $111.49 billion and $24.89, respectively.

NVDA has achieved significant progress across its business divisions, and this year, it will bring new product cycles with exceptional innovations to help boost its industry forward.

Since the AI boom began in late 2022, catalyzed by OpenAI’s ChatGPT, Nvidia’s stock has been up fivefold, and its total sales have more than tripled. The company’s high-end server GPUs are essential for training and deploying large AI models. Notably, tech companies like MSFT and Meta Platforms, Inc. (META) have spent billions of dollars buying these chips.

Recently, the chipmaker announced a new generation of AI chips and software for running AI models, giving customers another reason to stick to Nvidia chips over a growing field of competitors, including Advanced Micro Devices, Inc. (AMD) and Intel Corporation (INTC).

While NVDA’s stock has declined nearly 3% over the past month, several analysts affirmed their bullish sentiment toward the stock and see a significant upside potential, owing to its booming AI business and new innovative launches to maintain its leading position in the face of rising competition.

Given these factors, investors could consider buying NVDA for potential gains.