NVidia announced better than expected earnings and guidance for the January fiscal quarter of 2023 with sales and earnings beating analyst expectations. $NVDA shares jumped +29.10 or +14.02% on the results which also gave some hope to the beaten down semiconductor sector. Nvidia’s superior growth prospects are tied to the substantial investments it made in AI-powered technology over the past several years. CEO Jensen Huang commented that AI adoption is at an inflection point as the company prepares to launch new cloud-based AI products.
Nvidia Fiscal Q4 2023 Earnings
NVidia segments in game graphics and artificial intelligence (AI) chips saw huge growth in 2020 and 2021 during the pandemic, slowed down in gaming with inflation and back to work and school affects. However, we saw a big boost in gaming revenue this quarter.
Highlights
- Net income $1.4 billion, down 53% from last year but beating analyst expectations of $1.2 billion.
- Adjusted earnings per share were 88 cents, surpassing the expected 81 cents.
- Automotive division sales up 135% from the corresponding period a year ago. Sales for the division came in at $294 million, 13% higher than forecasts.
NVDA Stock Market Reaction
- $236.64 ▲+29.1 (14.02%) Close
- $236.64 ▼ +93.49(65.31%) YTD
- $236.64 ▲ +12.77(5.70%) past year
- $236.64 ▲ +175.158(284.89%) past 5 years
- 52wk High 289.24
- 52wk Low 108.10
Segments:
Gaming
In the quarter gaming revenue increased by 16% sequentially to $1.83 bln, handily beating analysts’ estimates of $1.5 billion. A newly announced partnership with Microsoft will bring XBox and Activision Blizzard games, including popular Call of Duty and Overwatch, to Nvidia’s GeForce Now cloud gaming services.
Data
Nvidia’s data centers were the biggest contributor to revenue, bringing in $3.62 billion for the quarter. Revenue in NVDA’s Data Center segment grew at a much more modest pace in Q4, increasing by 11% yr/yr, missing expectations, being 5% below the expected $3.81 billion but 11% higher than last year. This followed a jumping of 31% in Q3. The division is home to the Nvidia Omniverse, the company’s vision for an industrial metaverse that provides simulations for developing artificial intelligence-based robots and autonomous vehicles.
Persistent weakness in China, which is NVDA’s second largest market weighed again on sales of the company’s graphic processing units (GPUs). NVDA is anticipating an acceleration of growth for Data Center this fiscal year as China’s economy reopens and as hyperscalers continue to ramp up their investment.
Visualization
The professional visualization division handles the omniverse’s visuals and “enterprise capabilities” also missed analysts’ expectations. The unit made $226 million in sales during the quarter, down 65% from last year and 4% below what Wall Street expected.
Last quarter NVida introduced Omniverse Cloud, the company’s first software- and infrastructure-as-a-service offering, with a comprehensive suite of cloud services for artists, developers and enterprise teams to access metaverse applications.
Automotive and Embedded.
During the quarter, the automotive division kicked in again with a 135% rise from the corresponding period a year ago. Sales for the division came in at $294 million, 13% higher than forecasts. Last quarter Nvidia’s customers launched the all-electric Volvo EX90, powered by Nvidia Drive Orin and Xavier, and Polestar 3, the brand’s first SUV, which runs on the Nvidia Drive platform.
“These increases reflect growth in sales of self-driving solutions, computing solutions for electric vehicle makers and strength in sales of AI cockpit solutions,” Colette Kress, Nvidia’s chief financial officer, Colette Kress, wrote in an outlook for the company.
AI
NVDA’s new AI supercomputer runs on its H100 GPU and is now in full production. The company’s strategy is to offer AI-as-a-Service to enterprises, enabling them to deploy large language models and other AI workflows. GPUs are a natural fit for powering the kind of high-level computing that’s involved in AI, including for chat bots like OpenAI’s ChatGPT. NVDA is the global leader in the GPU market with a share greater than 75%.
China
Nvidia warned in August that it would be hit by U.S. export controls that prevent some of its fast artificial intelligence chips from being sold to Chinese companies. In November, it revealed a new chip that is designed to meet the U.S. export rules.
Nvidia said that the reduced sales from the GPUs banned in China would be largely offset by its alternative products.
Crypto
Nvidia’s graphic processing units (GPUs) were widely used by ether miners. Once the Ethereum ETH chain switched from a proof-of-work to a proof-of-stake mechanism, miners no longer needed the chips and Nvidia was forced to find revenue elsewhere.
With the collapse of FTX NVidia said it is unable to determine what impact slipping demand for crypto mining had on the lower revenues.
Outlook
- NVDA is anticipating an acceleration of growth for Data Center this fiscal year as China’s economy reopens and as hyperscalers continue to ramp up their investments
- NVDA’s superior growth prospects are linked to the substantial investments it has made in AI-powered technology over the past several years. CEO Jensen Huang commented that AI adoption is at an inflection point as the company prepares to launch new cloud-based AI products.
- Specifically, NVDA’s new AI supercomputer, which runs on its H100 GPU, is now in full production. The company’s strategy is to offer AI-as-a-Service to enterprises, enabling them to deploy large language models and other AI workflows.
- NVDA’s dominance in GPUs and the emergence of AI technology slots into its Data Center segment as demand for its H100 processor accelerates and as it expands its AI cloud service. NVDA is partnering with cloud computing giants like Microsoft (MSFT) and Google (GOOG) to enable customers to access its AI platform via a browser.
- Analysts are still expecting product launches, including a new chip architecture for AI factories called Hopper and a new generation for personal computers—to reverse the revenue decline seen in 2022.
- More information on product launches and the company’s strategy towards AI is expected to be released during Nvidia’s developer conference in March, according to several analysts.
Source: NVidia, AlphaStreet
From The TradersCommunity Research Desk