Nvidia (NVDA), a closely followed stock and current holding within the US Growth portfolio has announced third-quarter results which surpassed analyst expectations in another positive quarter for the company.
Nvidia Corp. (NVDA) is a current holding within the momentum component of the US Growth portfolio and has announced its latest earnings for the fourth quarter, with shares rising +5.32% in after-market trading on the back of the company outperforming expectations.
For the fourth quarter, Nvidia recorded a revenue above analysts’ expectations of $20.41 billion at 22.10 billion, an increase of over 250% on the previous years result of $6.05 billion. Earnings per share also topped forecasts by 12.10%, coming in at $5.16 compared to estimates of $4.603, with a gross margin above forecasts of 75.4% at 76.7%. This increase in revenue has been accredited to a surge in data centre revenue, which was up 409% over the year to $18.4 billion, above market expectations of $17.21 billion.
The company recorded an operating income of $14.75 billion, above estimates of $13.14 billion and the previous years $2.22 billion, while operating expenses rose by 25% on the previous year and was below analyst estimates of $2.23 billion at $2.21 billion. Nvidia also announced that its gaming sector reported a revenue of $2.9 billion, marking a 58% increase year-over-year and edging out the $2.72 billion forecast. NDVA’s recent expansion efforts has seen it allocate $2.47 billion to research and development, topping estimates of $2.43 billion.
The recent out-performance of technology has seen founder and CEO Jensen Huang, claim that “Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries, and nations.” With this surging demand seeing the company rise 371% since 2023 and 36% year-to-date, outperforming the broader Nasdaq Composite which is up 50% since 2023 and 3.79% year-to-date.
The company faces regulatory hurdles in the Chinese market, as they had to scale down the capabilities of its products in order to continue to sell to that region, which in the past has accounted for a quarter of revenue, with CFO Colette Kress adding that company’s projections would have been higher if it weren’t for the China rules. Increased competition has seen companies start to develop their own AI chips, with Advanced Micro Devices recently beginning to sell a line of accelerators called the MI300.
For the coming quarter, Nvidia are forecasting revenue of $24 billion, above the $21.9 billion average analyst estimate, with a gross margin of 77% and operational expenditure around $2.5 billion. Nvidia are currently working to expand its AI technology capabilities, with Huang claiming that governments and corporations need their own AI systems, to protect their data and gain a competitive advantage.
Although Nvidia has seen a fall in share price in recent days, the weakness should be viewed in the context of the stock’s recent outperformance. NVDA remains a high-quality company, well positioned for growth in what is a booming industry. As a reminder, Nvidia’s inclusion in the US Growth portfolio is based on the momentum component of the portfolio, and its inclusion will depend on how the stock trades between now and the next rebalance date of March 1st, 2024.
