Nvidia (NVDA) stock's stellar performance is being driven by powerful demand for the company's chips and other tech that enable artificial intelligence (AI) capabilities.
Nvidia (NVDA -6.62%) stock skyrocketed 150% in the first half of 2024. (Shares are up 165% through July 9.) That performance clinched the artificial intelligence (AI) chip leader the silver medal for best performers on the S&P 500 index. The gold medal went to Super Micro Computer, a server specialist that's also benefiting from surging adoption of AI.
For context, in the year's first half, the S&P 500 returned 15.3% and the tech-heavy Nasdaq Composite index returned 18.6%.
Before we dig in, it's helpful to know how Nvidia's revenue breaks down by market platform. Below is the revenue percentage breakdown for its most recent quarter (ended in late April). The company does not break out its earnings by platform, but it's safe to assume that its data center is its most profitable one.
- Data center: 87%
- Gaming: 10%
- Professional visualization: 1.6%
- Auto and robotics: 1.3%
Nvidia stock gained 36% in 2024 through mid-February, driven by momentum and strong demand for AI stocks
Nvidia stock had an especially great year in 2023. Last year, it soared 239% -- about 10 times the S&P 500's return. This performance was driven by voracious demand for the company's graphics processing units (GPUs) and related products and services that enable generative AI capabilities. This tech made a splash with consumers and business leaders alike following OpenAI's release of its ChatGPT chatbot in late 2022.
Momentum from last year and investors' continued strong appetites for AI stocks propelled Nvidia stock to a gain of 36% early in 2024 before its first major catalyst of the year. That catalyst was its release of quarterly results on Feb. 21.
Nvidia stock rose 17+% in the three market days after the Feb. 21 earnings release
On Feb. 21, Nvidia released its results for its fourth quarter of its fiscal year 2024, which ended Jan. 28. Shares soared 16.4% on the following day and 17.2% in the three market days following the release, driven by the quarter's results and guidance coming in better than Wall Street had been expecting.
In the quarter, Nvidia's revenue grew a whopping 265% year over year. Even better, adjusted earnings per share (EPS) surged 486%. The company's profits have been growing faster than its revenue, reflecting an increasing profit margin.
The quarter's growth was driven by the company's data center platform, its largest market platform and the one most benefiting from the growing adoption of AI. Its quarterly revenue skyrocketed 409% year over year. The gaming and professional visualization platforms also contributed to growth. Their revenue jumped 56% and 105%, respectively, from the prior year's period.
Nvidia stock gained 20% in the three market days after the May 22 earnings release
Nvidia stock was on fire for a few days following its release on May 22 of its super-strong results for the first quarter of its fiscal year 2025, which ended in late April. Better-than-expected quarterly results and guidance were two of three major catalysts, with the other being the company's announcement of a 10-for-1 stock split. (That split occurred on June 7.)
Nvidia stock rose 9.3% on the day following its earnings release and stock-split announcement, and tacked on 20% in the three market days following these events. And shares continued to rise through the end of the first half of the year, other than a minor pullback in mid-June.
In the fiscal first quarter, Nvidia's revenue and adjusted EPS rocketed 262% and 461%, respectively, year over year. Wall Street had been modeling for year-over-year growth of 243% and 413%, respectively.
The quarter's growth was driven by the data center platform, whose revenue surged 427% year over year. Nvidia's other three market platforms also grew year over year, with its gaming and professional visualization platforms showing particular strength. Their revenue jumped 18% and 45%, respectively.
Catalyst ahead: Earnings release likely coming in mid to late August
Nvidia hasn't yet announced a date for the release of its results for the fiscal second quarter (which ends in late July). However, investors can probably expect a date in mid or late August.
For fiscal Q2, management guided for revenue of $28 billion, which equates to growth of 107% year over year. It also guided (indirectly by providing a bunch of inputs) for adjusted EPS of $0.62, or 130% growth.
Wall Street's estimates are a bit higher -- $28.4 billion and $0.63 per share, respectively.
Exceeding Wall Street's estimates is not a sure thing. But I'm expecting the company to do what it nearly always does -- beat them by at least a solid margin. There's also no guarantee Nvidia stock will rise after the earnings release, but it has a good track record of doing so.
Beth McKenna has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
