(News Bulletin 247) – The graphics processor specialist has delivered breathtaking prospects for the second quarter, driven by the rise of generative artificial intelligence, that of ChatGPT. On Wall Street the title is soaring and could exceed the record for market capitalization increase over one day held by Apple.

It is undoubtedly the card of the year on Wall Street or even worldwide for a mega capitalization: Nvidia. The American specialist in graphics processors has experienced a spectacular surge since the beginning of the year, with a jump of 109% in its action. The company founded almost 30 years ago to the day (April 5, 1993) by Jensen Huang, still at the helm of the group, benefited from the stock market frenzy around the rise of ChatGPT, and, more broadly, from the generative artificial intelligence (AI).

The idea is hardly complex: Nvidia dominates the market for graphics chips essential for generating advanced tasks and applications in artificial intelligence.

As an (excellent) CNBC report shows, Microsoft and Google are thus equipping themselves with thousands or even tens of thousands of Nvidia A100 graphics processing units (GPUs) in their data centers to develop and train their conversational robots, ChatGPT and Bard, respectively.

The increased use of generative AI translates into more computing power requirements, and therefore greater demand for Nvidia’s products.

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A leap on the stock market to “drop your jaw”

Nvidia’s stock is on track for a new surge of fever this Thursday. The company delivered, Wednesday evening after the closing of Wall Street, a publication which delights the market. In pre-opening trading, Nvidia stock jumped 24.6%, a pretty unimaginable rise for a “megacap,” with Nvidia simply being the sixth-largest publicly traded company by market capitalization. CNBC calls it a “jaw-dropping” leap.

If the current pre-opening run continues through the close of Wall Street tonight, Nvidia would add $186 billion to its market capitalization to over $940 billion, more than twice that of LVMH. Nvidia would also approach a record held by Apple, namely the largest increase in terms of market capitalization over a session on Wall Street. According to Bloomberg, the apple group currently holds this trophy, with a jump of 190.9 billion dollars last November, followed by Amazon (190.8 billion in February 2022).

The results of the first quarter of Nvidia’s 2023-2024 fiscal year, which ended on January 31, proved to be better than expected. Total revenue of $7.19 billion was down 13% year-on-year, weighed down by the fall in the video game division which saw a 38% plunge. This “reflects the drop in demand due to the macroeconomic slowdown and the decrease in shipments to normalize the inventory levels of the distribution channels”, explained the chief financial officer, Colette Kress.

However, these revenues remain well above analysts’ expectations of $6.5 billion, according to a Refinitiv consensus quoted by CNBC. Nvidia notably recorded a jump in its turnover in its “data center” segment of 13% over one year. An increase driven “by the growing demand for AI large language models using GPUs based on our Nvidia Hopper and Ampere architectures”, underlined Colette Kress.

Ditto for earnings per share, at 1.09 dollars per title, which far exceeded the expectations of research departments (92 cents).

Towards stunning revenues in the second quarter

But beyond these data, it is the revenue forecast for the second quarter communicated by Nvidia which impresses. The group said it expects a turnover of 11 billion dollars, which would reflect a dizzying jump of more than 60% over one year. Above all, this indication explodes the Bloomberg consensus, by 7.2 billion dollars.

Jensen Huang said in a statement that the equivalent of $ 1,000 billion in installed data center capacity needs to be increased in power “as companies race to apply generative AI in every product, service and business process. “. Hence the stratospheric outlook communicated by the company.

“They may be in a unique position,” Sanford C. Bernstein analyst Stacy Rasgon told Bloomberg Television. According to this analyst, the objective provided by the company for its second quarter would imply a growth of 75% of the revenues of the division data centers on a year for the period. “Is this a one-off phenomenon or a new norm? I don’t know,” he adds.

Naeem Aslam, of Zaye Capital, praises the strategy deployed by Jenson Huang, which is “the right one”. “The problem is that right now AI is over-hyped – most people think it’s the only missing piece in the whole world. We believe AI has a bright future, but current valuations have gotten too high and buying stocks like Nvidia could cost you money.”