Despite a very high benchmark, NVIDIA NASDAQ:NVDA has beaten Wall Street’s expectations. The artificial intelligence boom is continuing to catapult demand for the tech company’s complex chips into the stratosphere, with sales of $16bn expected in the three months to October. That is streets away from analyst expectations and reflects the seemingly insatiable appetite for Nvidia’s products, which are the leading option for creating AI tools like ChatGPT.
NVIDIA stock saw a +7% boost approximately in after hours trading in the US last night. Whisper estimates had previously suggested NVIDIA would achieve $12bn Q2 revenues and $14bn in Q3. In the end NVIDIA smashed even the most optimistic projections, with Q2 at a thumping $13.51bn.
#1. It’s all about the H100 chip
NVIDIA’s H100 chip is where it’s at, and where demand is far outpacing supply, H100 is currently selling for double its original price in the tens of thousands. Being an early beneficiary of a megatrend like Artificial Intelligence is an enviable and rare opportunity, but bears will be arguing that at some point the valuation will start to appear full. Luckily for NVIDIA, a cursory glance would suggest there aren’t many bears around.
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#2. Investors need to get exposure to the AI boom
Clearly, AI is not just the future, it’s the present. Investors who are serious about building their long-term wealth need exposure to this pivotal driver of innovation, competitiveness, and profitability across almost all industries. We’re still at the beginning of the AI age and investors should not miss out on having an early advantage. Almost everyone should have investment exposure to AI as part of the mix.
#3. Keep an eye out for challengers
Whilst analysts expect NVIDIA to continue to dominate the AI boom for at least the rest of the year, probably longer, savvy investors will now likely be thinking that perhaps a lot of the good news is already priced-in for this company. They will be asking: can NVIDIA shares really jump another 210% over the next six months? Or are there other similar and/or better opportunities in the same arena? They will already be looking for The Next Big Thing – and so they should. Despite the fact that NVIDIA is way out in front, and probably still has not peaked, history teaches us that challengers can offer potentially blowout returns for investors.
#4. Hedge funds are backing NVIDIA to the hilt
It looks like everyone in Wall Street is now firmly on the NVIDIA bandwagon. According to the latest Hedge Fund Trend Monitor out from Goldman Sachs this week, some 1.9% of NVIDIA stock is now owned by the funds. This is based on positions at the end of June, and we can be fairly certain hedge funds have been adding to that in July and August. This equates to over $2bn in hedge fund positions. Top backers of NVIDIA in this community include the likes of Appaloosa Management and Third Point, as well as Soros Fund Management. The stock still ranks fifth amongst hedge fund favourites however, with Microsoft NASDAQ:MSFT, Meta Platforms NASDAQ:META and Amazon NASDAQ:AMZN in the top three.
#5. NVIDIA owns the GPU market right now
The sales numbers are really being underpinned by soaring demand for NVIDIA GPUs. Supply has become the major issue as it seems NVIDIA can’t get these out into the market fast enough, and that will undoubtedly have an impact on pricing. The largest cloud computing companies are being forced into a massive infrastructure spend as they seek to remain competitive in the post-ChatGPT landscape. CEO Jensen Huang told analysts yesterday that this boom in generative AI spending is not a near term thing. Tech giants are increasingly diverting spending into NVIDIA chips and away from general purpose computing, as they seek to boost their AI capabilities.
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