One of the companies in our portfolio, Nvidia, which makes microchips that power most artificial intelligence applications, began an extraordinary run a year ago. Fueled by an explosion of interest in A.I., the Silicon Valley company, in May 2023, said it expected its chip sales to go through the roof.
And sure, they did — and the fervour hasn’t stopped, with Nvidia raising its revenue projections every few months. Its stock soared, driving the company to a more than $2.81 trillion market capitalisation. It made it more valuable than Alphabet, the parent of Google, and only $100B away from surpassing Apple (AAPL), the second-most valuable listed company.
And guess what? The party isn’t stopping soon.
Last Wednesday, Nvidia again reported soaring revenue and profits that underscored how it remains a dominant winner of the A.I. boom, even as it grapples with oversized expectations and rising competition.
Revenue was $26 billion for the three months that ended in April, tripling sales from a year earlier for the third consecutive quarter. Net income surged sevenfold to $5.98 billion.
Nvidia, which originally sold chips for rendering images in video games, has benefited after making an early, costly bet on adapting its graphics processing units, or GPUs, to take on other computing tasks.
When A.I. researchers began using those chips more than a decade ago to accelerate tasks like recognizing objects in photos, Mr. Huang jumped on the opportunity. He augmented Nvidia’s chips for A.I. tasks and developed software to aid developments in the field.
The company’s flagship processor, the H100, has enjoyed feverish demand to power A.I. chatbots such as OpenAI’s ChatGPT. While most high-end standard processors cost a few thousand dollars, H100s have sold for anywhere from $15,000 to $40,000 each, depending on volume and other factors, analysts said
What does this mean?
Nvidia is responsible for roughly a fourth of the S&P 500’s uptick this year. And with its AI chips more in demand than ever, analysts have been bucking up their projections ahead of this week’s big reveal. Turns out they were still too conservative; Nvidia made $26 billion in revenue last quarter, 18% more than the period before and well beyond predictions of $24.7 billion.
Moreover, the company said the next set of results will be spiffier, forecasting sales of $28 billion, above analyst expectations of $26.8 billion. Investors liked that sound: they initially sent Nvidia’s stock 4% higher after the news, meaning it’s now virtually doubled this year after more than tripling in 2023.
Nvidia also announced a 10-for-1 stock split on Wednesday, which isn’t a shocker. Companies perform splits when their stock becomes too successful, commanding a price tag so high that it puts retail investors off. By splitting the stock, the firm creates the illusion that its shares are of better value, even though it would take ten new $100 shares to match the ownership of a single old $1,000 one.
Why does this news matter to you?
Nvidia’s remarkable performance underscores the massive potential of the AI sector, and being a part of this growth story can be incredibly rewarding. With Nvidia driving a significant portion of the S&P 500’s gains and consistently outperforming market expectations, having it in your investment portfolio positions you to benefit from this tech giant’s upward trajectory.
Investing in the Risevest stock plan gives you access to a carefully curated portfolio that includes high-performing stocks like Nvidia. Our expertise in selecting top-tier companies means you don’t have to navigate the complexities of the market alone; we’ve researched and selected Nvidia for its robust performance and future potential.