Last week, NVIDIA released its quarterly financial results, revealing that the chipmaker’s business is thriving due to the AI boom. The company’s revenue surged from $7.2 billion in the same quarter last year to an impressive $26 billion this year, marking a 262% increase.
A significant growth driver for NVIDIA was its data center technology segment, with revenue reaching $22.6 billion, more than five times the previous year’s figure. The company also reported a 23% growth within just three months.
“The next industrial revolution has begun. Companies and countries are partnering with NVIDIA to transform traditional data centers, costing trillions of dollars, into accelerated computing hubs and build a new kind of data center – AI factories – to produce a new product: artificial intelligence,” said Jensen Huang, founder and CEO of NVIDIA, in a press release. “Our data center growth was driven by strong and growing demand for generative AI training and inference on the Hopper platform. Beyond cloud service providers, generative AI has expanded to consumer internet companies, enterprises, sovereign AI, automotive, and healthcare customers, creating multiple billion-dollar vertical markets.”
For the current quarter, the company forecasts another revenue increase to $28 billion, exceeding analysts’ average expectations of nearly $27 billion.
“We are ready for our next wave of growth. The Blackwell platform is in full production, laying the foundation for generative AI at a trillion-parameter scale. Spectrum-X opens up a brand-new market for us to bring large-scale AI to pure Ethernet data centers,” Huang added.
Several investment banks, including Bank of America, Citigroup, JPMorgan, UBS, and Morgan Stanley, responded to the released quarterly results and outlook by raising their price targets and reaffirming their buy recommendations. According to TipRanks data, NVIDIA stock receives a strong buy recommendation from a total of 40 analyst ratings (37 buy, 3 hold). The average price target is $1,179.72, representing a potential 10.80% change from the last price of $1,064.69 (as of May 24, 2024).
NVIDIA Stock Surpasses $1,000 for the First Time
Following the surprisingly strong quarterly results, NVIDIA’s stock price surpassed the $1,000 mark for the first time after US markets closed. On the following day of official NASDAQ trading, the AI leader’s shares increased by 9.32%, reaching $1,037.99. The stock maintained its position above the $1,000 mark in the subsequent days. However, these high stock prices might soon become a thing of the past. The company plans to make its shares more attractive to investors through a stock split. On June 7, 2024, every NVIDIA shareholder will receive nine additional shares for each NVIDIA share they own, effectively reducing the stock price to one-tenth of its current value.
What the NVIDIA Stock Split Means for Investors
So, what can investors expect from the upcoming stock split? Sam Stovall, Chief Investment Strategist at CFRA, explained to CNBC that investors tend to react positively to splits. However, this reaction is more psychological than fundamental. “People would rather buy 16 shares at $20 each than four shares at $80, even though it’s the same – it’s just human nature,” the expert noted.
The announcement of a stock split often coincides with strong financial performance in the recent past and could indicate the company’s confidence in future success. “Two messages are conveyed here: first, they want smaller retail investors to participate in the stock rally, and second, it shows the company’s confidence in its own profit forecasts, allowing it to maintain a high stock price,” Stovall explained.