NVIDIA Corporation (NASDAQ: NVDA) impressed with its most recent quarterly results, surpassing Wall Street predictions with robust figures. The chip giant’s Q3 earnings soared past expectations, revealing record-breaking revenue of $18.12 billion, exceeding forecasts by a remarkable 11.91% and marking a surplus of nearly $2 billion. Earnings per share followed suit, surpassing estimates by 19.40% at $4.02.
This outstanding performance stems from NVIDIA’s pivotal role in driving the shift from general-purpose computing to accelerated computing and generative AI. The CEO’s insights underscore the rapid adoption of the advanced technology across various industries, extending beyond initial adopters to encompass a wide spectrum of businesses.
NVIDIA’s stock performance in 2023 was exceptional, boasting an impressive 238.87% gain. This growth significantly outshines its tech peers and outpaces the tech-heavy NASDAQ100 Index fourfold. Such phenomenal growth highlights NVIDIA’s forefront position in the AI revolution, captivating both markets and investors with its groundbreaking innovations.
Source: Trive – TradingView, Nkosilathi Dube
Technical
NVIDIA’s stock soared to unprecedented heights, hitting a record high of $505.48 per share, surging significantly above the 100-day moving average. However, the 502.16 per share level turned into a notable resistance point after the stock reversed from its peak. Around $401.03 per share, a substantial support level emerged, proving its strength after being tested multiple times and forming a sturdy base.
Despite the vigorous climb, the stock’s momentum waned, leading to fluctuation between the established support and resistance levels, resulting in a lower upside volume. This oscillation created a pattern resembling a rectangle, indicating a broader phase of sideways movement and consolidation.
Within this consolidation phase, the stock revisited the upper boundary of the rectangle pattern following a rebound from the support. If the upward momentum persists, a breakout beyond this resistance level could signal the potential for further gains, potentially setting a fresh all-time high. Investors, particularly optimistic ones, could monitor Fibonacci extension levels as potential upward destinations. The 23.60% level could become relevant if the stock breaches the resistance, potentially becoming a focal point for bullish sentiment. This tug-of-war between support and resistance levels marks a pivotal phase for NVIDIA’s stock, where a breakout could signify new milestones.
Fundamental
NVIDIA’s impressive performance is propelled by soaring demand for its GPUs, especially in generative AI applications. Their Q3 report showcases record-breaking revenue of $18.12 billion, a remarkable 34% increase from the previous quarter and a staggering 206% surge year-over-year. Data centre revenue notably hit $14.51 billion, up 279% from a year ago, with cloud infrastructure providers such as Amazon.com contributing to half of its revenue, underlining NVIDIA’s dominance in cloud service backbone support.
While gaming revenue hit $2.86 billion, a notable 81% year-over-year growth, the company’s primary revenue now stems from server farm deployments, highlighting a pivot towards data centre services.
Source: Trive – NVIDIA Corporation, Nkosilathi Dube
Operating income skyrocketed by 652%, resulting in a net income surge of 588% year-over-year to $10.02 billion. Its Q4 guidance anticipates a monumental $20 billion in revenue, indicating a substantial 231% growth projection. Strategic moves like the introduction of the GH200 GPU and efforts to scale supply for AI chips are notable and could boost the company’s bottom line in the coming quarters.
Source: Trive – Koyfin, Nkosilathi Dube
NVIDIA’s historic high free cash flow of $10.32 billion demonstrates financial robustness, empowering strategic investments and shareholder rewards. However, China’s import restrictions and looming competition from AMD and tech giants present challenges. NVIDIA’s EBITDA margin at 49.39% showcases its profitability prowess, surpassing that of many of its competitors. With an impressive Return On Equity (ROE) at 69.17%, NVIDIA effectively utilizes shareholder investments, positioning itself as a frontrunner generating substantial returns compared to peers.
Source: Trive – Koyfin, Nkosilathi Dube
A fair value of $529.23 per share was estimated after factoring in future cash flows.
Summary
NVIDIA’s stellar performance in Q3 catapulted it ahead in the tech realm, stunning Wall Street predictions with impressive figures and record-breaking revenue. Despite facing resistance, the stock’s robust surge to unprecedented heights signifies a critical phase. Its pivot toward AI-driven computing promises continued growth, positioning the company as a trailblazer in technological innovation and profitability.
Sources: Nvidia Corporation, CNBC, Reuters, Nasdaq, TradingView, Koyfin
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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