What Happened:
Shares of leading designer of graphics chips Nvidia (NASDAQ:NVDA) jumped 5.1% in the morning session after Reuters reported that four Chinese electric vehicle brands, Li Auto, Great Wall Motor, Zeekr, and Xiaomi's new EV (electric vehicle) unit, will use Nvidia's DRIVE technology for their automated driving systems.
The Nvidia DRIVE platform is a collection of technologies developed by Nvidia for autonomous driving and advanced driver-assistance systems (ADAS). It includes hardware and software components designed to enable vehicles to perceive and respond to their environment, ultimately achieving higher levels of automation. Given the potential in the booming Chinese EV market, this update hints at possible new growth opportunities for Nvidia in the region.
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What is the market telling us:
Nvidia's shares are very volatile and over the last year have had 13 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 8 months ago, when the stock gained 23.7% on the news that the company delivered an exceptional quarter that topped analysts' estimates across key metrics. Revenue surpassed expectations by an impressive 10.3%, driven by strong data center revenue. Notably, the company improved profitability, with both gross margin and operating margin outperforming expectations. Earnings per share (EPS) beat by an impressive 18.8%. Inventory levels experienced a nice decrease during the quarter. In addition to the outstanding quarterly results, the revenue guidance for the next quarter surpassed expectations by over 50%. Yes, that's not a typo. Similarly, the operating profit guidance exceeded Consensus estimates meaningfully.
Founder and CEO Jensen Huang emphasized the ongoing transformations in the computer industry, particularly the advancements in accelerated computing and generative AI. He highlighted Nvidia's readiness to seize the opportunities presented by the anticipated trillion-dollar shift in global data center infrastructure from general-purpose to accelerated computing, as firms implement generative AI into their business operations. Overall, the company's blowout quarter, with its impressive revenue growth, enhanced profitability, and positive guidance, underscored its strength in the market. Nothing in this world is perfect, but this was a near-perfect quarter.
Nvidia is up 7.5% 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 $14,808.
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