- Nvidia Q2 earnings smash expectations
- Follows on from better-than-expected Q1 as AI boom continues
- Shares hit new record levels in after-hours trading
Chip designer Nvidia (NVDA:NASDAQ) continues to knock the lights out with its performance. This helps to justify some of the AI-driven hype which has built up around the company and has driven its share price to new record levels in after-hours trading.
The $1 trillion-plus business reported second-quarter sales of $13.5 billion, up from $7.2 billion in Q1 and ahead of the consensus forecast of $11 billion.
Net income reached $6.1 billion, up from $2 billion in Q1 and comfortably ahead of CEO Jensen Huang’s own guidance back in May for a figure of around $5 billion.
Inventory dropped by another $300 million to $4.3 billion, suggesting that a 2022 slowdown in sales and big increase in unsold product was a one-off.
Nvidia stands to benefit from the development of AI because its chips are used to develop machine learning software. The company calls its DGX system an ‘AI supercomputer’ and ‘the blueprint of AI factories’ being built across the globe.
As major tech companies invest heavily in AI, this is translating into significant earnings growth for Nvidia.
Nvidia is world’s top AI pick after detailing huge spike in technology demand
Its positive results helped provide a lift to the wider market, with gains across Europe. US stocks are expected to open higher when trading resumes on Wall Street.
‘POSTER CHILD FOR ARTIFICIAL INTELLIGENCE’
AJ Bell investment director Russ Mould commented: ‘Nvidia is seen as the poster child for artificial intelligence, with its chips playing a key role in the roll-out of AI systems. AI has been the hot investment theme in 2023 and Nvidia’s results imply there is a lot more to go for.
‘As chief executive Jensen Huang says: “A new computing era has begun”. That’s crucial to why investors are rushing to own the stock. They see this as the start of something big, with further gains to come. In this situation it is important to not get carried away and have unrealistic expectations for what a company can achieve.’
‘Just remember that shares in the “next big thing” often follow the same pattern – they shoot up on the hype, fall back as expectations get rebased, and only move up again in a sustained fashion if there are truly plugged into a structural growth market.’
DISCLAIMER: AJ Bell is the owner of Shares magazine. The author (Tom Sieber) and editor (Daniel Coatsworth) own shares in AJ Bell.
