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Key Takeaways
- Semiconductor and AI-adjacent tech stocks surged Thursday following a fourth-consecutive earnings beat-and-raise from AI leader Nvidia.
- Nvidia blew past analyst estimates with fourth-quarter earnings of $12.29 billion on $22.1 billion in revenue.
- Jefferies analysts forecast Nvidia’s “will become the dominant ecosystem” in the computing industry, in which AI has prompted a “tectonic shift.”
Semiconductor and AI-adjacent stocks surged in early trading, riding the wave of optimism generated by another blowout quarterly earnings report from Nvidia.
Nvidia (NVDA) reported revenue of $22.1 billion, a 265% increase from a year ago and more than $1 billion more than analysts had forecast. Net income of $12.29 billion, or $4.93 per share, was also more than $1 billion higher than Wall Street’s consensus estimate and represented a more than eight-fold increase from the year-ago quarter. Shares soared 15% to a record high early Thursday afternoon.
Rising Nvidia Lifts Other AI Stocks
Optimism that the AI boom will benefit not just Nvidia, but also the hardware companies that support AI ecosystems, sent scores of tech stocks higher Thursday.
The iShares Semiconductor ETF (SOXX) jumped more than 4% to an all-time high of more than $642. Advanced Micro Devices (AMD), one of Nvidia’s fiercest competitors, soared more than 11%. ASML Holding (ASML) and Applied Materials (AMAT), which make the equipment required to manufacture the world’s most sophisticated semiconductors, both gained more than 4%.
Shares of Super Micro Computer (SMCI), the data center technology company that has seen its shares triple in value this calendar year alone, jumped more than 25%, exceeding even Nvidia’s post-earnings gain.
Chip designer Arm (ARM), which counts Nvidia among its many big tech customers, gained roughly 7%. Its shares surged nearly 50% in one day earlier this month after it beat earnings estimates and raised its full-year forecast on surging AI demand.
And Vertiv Holdings (VRT), shares of which tumbled yesterday after its missed earnings estimates and offered lower-than-expected current-quarter guidance, rose more than 6% Thursday.
The good news for these and other AI-adjacent companies, data center demand remains strong and is broadening. “While shipments to the large cloud services providers (or CSPs) continue to represent approximately 50% of Data Center segment revenue, management’s commentary pointing to broad-based adoption of Gen AI across industry verticals including Healthcare, Financial Services and Automotive was encouraging,” wrote Goldman Sachs analysts in a note.
Nvidia Cements AI Leadership
However, most analysts in their post-earnings coverage were laser-focused on Nvidia and its unique position as the engine of the AI boom.
BofA Securities analysts noted the significance that AI inference accounted for 40% of data center revenue. “AI inference is correlated with revenue bearing AI which is supposed to be more competitive, as opposed to AI training which NVDA already dominates,” according to analysts.
Jefferies analysts were even more bullish on the data point. “Typically, a single, general purpose ecosystem captures 80% of the value of each computing era,” they wrote, citing Intel’s (INTC) PC dominance and Apple’s (AAPL) smartphone position. “We believe NVDA’s commentary of inference revs capturing ~40% of datacenter revs in 2023, highlights this.” The company, they said, “will become the dominant ecosystem as the compute industry sees a Tectonic Shift to a Parallel Processing Computing Era.”