What Happened:
Shares of leading designer of graphics chips Nvidia (NASDAQ:NVDA) jumped 10.4% in the pre-market session after the company reported fantastic earnings with beats across nearly every key metric. We were particularly impressed by its revenue beat, driven by strong performance in the data center segment, which houses the company's AI chips division. Furthermore, we were encouraged by Nvidia's revenue guidance for the next quarter, which blew past analysts' expectations. Lastly, the company demonstrated its commitment to shareholders by announcing a $25 billion share buyback. This quarter was particularly impressive in the face of sky-high buy-side expectations.
Following the results, Nvidia earned multiple upgrades from Wall Street analysts. WestPark Capital upgraded the stock's rating from Hold (Neutral) to Buy and assigned a price target of $690. Similarly, Stifel upgraded the rating from Hold (Neutral) to Buy and raised the price target from $440 to $600. Finally, Exane BNB Paribas upgraded the rating from Neutral to Outperform (Buy) and assigned a price target of $745.
After the initial pop the shares cooled down to $479.92, up 1.85% from previous close.
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What is the market telling us:
Nvidia's shares are very volatile and over the last year have had 30 moves greater than 5%. But moves this big are very rare even for Nvidia and that is indicating to us that this news had a significant impact on the market's perception of the business.
The previous big move we wrote about was three days ago, when the company gained 5.24% on the news that Wall Street analysts raised their price targets on the company's stock in anticipation of its Q2 2023 earnings on August 23, 2023.
KeyBanc analyst John Vinh maintained an Overweight (Buy) rating and raised his price target from $550 to $620. Vinh expects Nvidia's Q2'2023 earnings results to exceed Wall Street's expectations. Similarly, HSBC analyst Frank Lee maintained a Buy rating and raised his price target from $600 to $780, adding, "Demand for AI GPUs is expected to continue to exceed supply." These price target hikes highlight the market's favourable sentiment towards Nvidia and the potential of its AI-based GPUs.
Nvidia is up 236% since the beginning of the year. Investors who bought $1,000 worth of Nvidia's shares 5 years ago would now be looking at an investment worth $7,080.
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