Nvidia stock skyrockets on strong guidance: ‘it represents true demand’

Shares of Nvidia Corporation (NASDAQ: NVDA) are up nearly 30% in extended hours after the semiconductor behemoth reported market-beating results for its first financial quarter.

More importantly, the multinational issued guidance for the current quarter that was well above Street estimates.

Nvidia now expects generative artificial intelligence to help push its revenue to a record $11 billion (give or take 2.0%) in Q2 versus analysts at $7.17 billion only. On CNBC’s “Closing Bell: Overtime”, Needham’s Rajvindra Gill said:

Generative AI is driving a step function increase for inferencing deployed in data centres. Semiconductors are the picks and shovels of AI and Nvidia is the biggest pick and shovel in this space.

Gill currently has a “buy” rating on Nvidia stock.

Net income printed at $2.04 billion versus the year-ago $1.62 billion
Per-share earnings also climbed significantly from 64 cents to 82 cents
Adjusted EPS came in at $1.09 as per the earnings press release
Sales declined about 13% on a year-over-year basis to $7.19 billion
FactSet consensus was 92 cents a share on $6.53 billion in revenue

Nvidia also topped Street estimates for adjusted gross margin by 400 basis points in Q1. According to the Needham analyst:

It represents true demand. You’re seeing significant uptick in the H100, in the hyperscaler. You’re also seeing inference being adopted by folks like Google Cloud. This trend won’t slow down. It’s going to speed up.

Nvidia brought in $2.24 billion in sales from its gaming division in the recently concluded quarter – beating estimates but down 38% versus a year ago. Still, Rajvindra Gill noted:

On a sequential basis, it’s up. It’s now returning to its normal run rate. They got the market ready to upgrade to their next gen gaming architecture. That appears to be on track. So, gaming seems quite strong as well.

Revenue from datacenter was $4.28 billion in the fiscal first quarter – a better-than-expected 14% annualised increase. Including the after-hours price action, Nvidia stock is now up a whopping 170% versus the start of 2023.