AI Poster Child, Nvidia Delivers Stimulus Package

Jensen Huang, the visionary force behind Nvidia and a titan in the realm of Artificial Intelligence (AI), orchestrated an oxymoronic financial triumph that unsurprisngly exceeded consensus forecasts. The company’s quarterly report, released yesterday, outstripped all expectations, heralding a surge in investor enthusiasm and propelling Nvidia’s market capitalization to unprecedented heights of $2.6 trillion.

In the wake of this report, it comes as no surprise that analysts are revising their estimates upwards, aiming them towards the stratospheric valuation of $3 π‘‘π‘Ÿπ‘–π‘™π‘™π‘–π‘œπ‘›1,200 per share. However, in light of the recent developments, this consensus may well soar even higher, edging towards a remarkableΒ 1,300 1,500 territory. Notably, this extraordinary surge has triggered a widespread bout of profit-taking in various stocks today, with investors redirecting their Bullish fervor almost exclusively towards Nvidia.

Indeed, the Nvidia phenomenon has proven to be nothing short of staggering; the company’s market capitalization ascended by a staggeringΒ 2 trillion leap over the past 17 months. While superficially reminiscent of classic speculative bubbles, Nvidia’s stock valuation, when assessed on a forward earnings basis, appears far from extravagant.

If this were not impressive on its own, Nvidia’s revenue drivers have undergone a remarkable ascent, more than tripling over the past year. The AI-related data center category, for instance, achieved an astounding 427% growth compared to the previous year, surging to an impressive $3.2 billion in networking revenue, a figure that dwarfed last year’s sales threefold. Additionally, the company engaged in a shareholder freindly $7.7 billion stock repurchase initiative and bolstered its modest dividend by 150% during the quarter.

Beyond these sensational revenue milestones, Nvidia’s dominant technology has allowed the company to uphold a remarkable 70% profit margin. Much like the Federal Reserve’s protracted interest rate policies, Nvidia’s sustained profit margin paints a picture of higher for longer growth rates, with even older chip models gaining renewed traction in anticipation of upcoming, superior chip releases slated for later this year. Notably, demand for these older chips has surged, leading to stiff competition among customers and, to a lesser extent, competitors, for their allocation.

Jensen’s forward guidance indicates a backlog that should continue delivering amazing growth rates over the next several quarters, thus anyone waiting for deep corrections need to realize that minor 10 to 25% pullbacks in NVDA stock will be bought up with increasing enthusiasm. While the market used the extremely positve tech news today to take some profits, the AI movement led by Nvidia provides a nice tailwind for this Bull market, adding a hidden stimulus to the massive Government handouts this year. A 10% correction market wide into September – October would be a normal expectation, but this is still a dip buying Bull market environment with no current overbought reading on the medium term.

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