NVIDIA Corp. (NASDAQ: $NVDA) is a major American tech company that operates as a fabless chip designer. Based in Santa Clara, CA, it is famous for its GPUs, APIs used in high-end computing, and chips for the auto industry and mobile computing.
NVIDIA’s chips with specialized GPU architectures like CUDA for parallel computing are in high demand in the AI and machine learning industry. The company has created several innovative products, such as the Tesla GPUs for data center AI training and the Quadro GPUs dedicated to professional visualization.
Record Q4 Revenue and Upbeat Guidance
On February 22, 2024, NVIDIA released its fiscal Q423 financial report. Revenue reached $22.10 billion, up 22% sequentially and 265% year-over-year, way above expectations. It also reported a record 409% Y/Y increase and a 27% increase sequentially to $18.4 billion in Data Center revenue. The company reported an adjusted EPS of $5.16, above estimates of $4.64. Full-year revenue increased 126% to $60.9 billion.
The quarter was one of the most successful for all the segments, with Data Center again proving to be the best-performing segment. Data center revenue for a full fiscal year reached $47.5 billion, a three-fold increase compared to the previous year. Management attributed the impressive data center growth to AI, with NVIDIA’s products being in high demand in the latest generation of AI models.
NVIDIA estimates roughly 40% of ITS data center profit comes from AI inference, that is, using pre-trained AI models to produce content, recommendations, translations, and other real-time use cases. This number provides evidence of a remarkable rate of wider adoption last year.
For the current quarter, NVIDIA guided revenue of $24 billion, plus or minus 2%, a 9% robust growth sequentially at the midpoint. Quarter-on-quarter growth for Data Center and Professional Visualization revenues are projected to remain solid in the second quarter.
What Drove the Quarter?
At the quarterly earnings call, NVIDIA CEO, Jensen Huang, praised two major changes in the industry that led to the Data Center revenue growth.
He said, “The trillion-dollar installed base of Data Center infrastructure is rapidly transitioning from general-purpose to accelerated computing. As Moore’s Law slows while computing demand continues to skywalk, companies may accelerate every workload possible to drive future improvement in performance, TCO and energy efficiency.”
Furthermore, Huang remarked that generative AI is a new era of computing, which creates opportunities for new applications and even new sectors. He stated, “At the same time, companies have started to build the next generation of modern Data Centers, what we refer to as AI factories, purpose-built to refine raw data and produce valuable intelligence in the era of generative AI.”
What Does It Mean for NVIDIA?
NVIDIA’s high-end chips have positioned it as a key player in the global AI industry. While traditionally expensive, NVIDIA, with triple-digit growth in revenue, forestalls any chance of a decline. AI will fundamentally change how businesses work as AI adoption grows in this decade, immensely benefiting NVIDIA’s AI infrastructure.
NVIDIA has a multi-year technological lead in accelerated computing for AI with software and model complexity, which could give it an edge despite growing competition. As the major player in the AI data center sector, NVIDIA’s geographical dispersion and robust roadmap indicate that it will consistently capitalize on its strengths even under the existing restraints.
NVIDIA’s Stock Performance
NVIDIA shares soared 16.40% to record all-time highs of $785.38, a $110.66 surge as of February 23, 2024, adding over $250 billion market value in one day following solid Q4 2023 results. It has been one of the top-performing large-cap stocks over the past decade.
In the past 52 weeks, its value has grown by 237.28%, compared to the 28.14% gain of the S&P 500 in the same period and up 69.26% year-to-date. NVDA stock is currently above its 50-day and 200-day moving averages of $584.41 and $469.13, respectively.
Is NVDA Stock Worth Buying in 2024?
With NVDA stock hitting new highs, investors might be concerned about whether the stock is still a buy. Its high valuation, including a forward P/E of 38.76 and a trailing P/E of 65.83, means it has a small margin of error. It means there are high expectations on earnings, and any misses could trigger a massive selloff.
However, the generative AI represents a multi-hundred billion dollar opportunity where NVIDIA has taken the lead. With its dominance, a great product roadmap, and top-notch execution, NVIDIA is positioned to continue growth in the coming years. Although valuation limits the upside for short-term returns, long-term investors could benefit from holding NVDA stock.
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