A well-deserved leader in the field of AI chips$NVIDIA (NVDA.US)$The explosive performance once again shocked investors around the world. After the US stock market opened on May 23, Nvidia soared by about 12% and eventually closed up 9.32%. The stock price broke through the $1,000 mark for the first time and continued to set new record highs, reaching a total market value of 2.55 trillion US dollars.
Looking at overall results, in the first quarter of fiscal year 2025, Nvidia achieved revenue of 26 billion US dollars, an increase of 262% over the same period last year. This is the third consecutive quarter where Nvidia's revenue grew by more than 200% year on year; net profit was 14.81 billion US dollars, up 628% year on year. Total revenue and data center revenue both hit new highs, and the Q2 revenue guidelines were raised above expectations. In addition, Nvidia also officially announced “1 split by 10” and drastically increased dividends.
Although Nvidia has soared by more than 100% since the beginning of the year, Wall Street's bullish voice against Nvidia has become more aggressive, driven by the company's strong positive outlook. Analysts are betting heavily that after Nvidia's stock price stabilizes at $1,000, there is still room to continue to rise.
Growth engine! Blackwell will generate significant revenue for Nvidia
In February of this year, Nvidia's GTC 2024 was packed with over 11,000 participants from around the world. Hwang In-hoon said, “Accelerated computing has reached a critical point, and general computing has lost momentum. Compared to general computing, accelerated computing allows every industry to be significantly accelerated.”
New industries require larger models, and larger multi-modal AI requires larger GPUs. Wong In-hoon pulled out a brand new Blackwell chip from his pocket and held it side by side with the Hopper chip. The latter seemed a little smaller. Compared to Hopper architecture GPUs, the Blackwell architecture GPU's single-chip training performance (FP8) is 2.5 times that of Hopper architecture, and the inference performance (FP4) is 5 times that of Hopper architecture.
Compared to Hopper, Blackwell can reduce costs and energy consumption to 1/25 of what it used to be. Blackwell platforms include fifth-generation NVLink, next-generation InfiniBand, and x800 series Ethernet switches. According to Nvidia executive Kress, Blackwell's GPU architecture is 4 times faster in training than the H100, 30 times faster in inference, and can run large language model generative AI with trillion parameters in real time.
On the Nvidia conference call, company executives brought a series of exciting news. Huang Renxun pointed out that the new Blackwell chip will be shipped in the second quarter of this year, increased production in the third quarter, and launched in data centers in the fourth quarter, bringing a large amount of revenue to the company. He also revealed that after Blackwell, there are new chips, and the company's technology development pace is “very fast” and can “be updated every year.” Notably, the high-profile Blackwell chip is currently in full production.
The launch of Blackwell also gave a “strong injection” to the market. Investment bank Jefferies raised Nvidia's target price to $1,350. The key reason is that Blackwell's rapid commissioning “is expected to increase the company's performance beyond expectations later this year.”
Nvidia successfully broke through $1,000, and Wall Street's bullish sentiment is becoming more aggressive
After Nvidia's extremely strong results were announced, many well-known Wall Street investment institutions raised their expectations for Nvidia's stock price in the next 12 months. The most aggressive bullish target has reached 1,400 US dollars.
First, many analysts believe that Nvidia's growth momentum will continue to be strong and will also bring large shareholder returns. Bank of America analyst Arya rated Nvidia as a “buy” and drastically raised the 12-month price target from $1,100 to $1,320. The analyst now believes that Nvidia's earnings per share could reach $50 in two years, higher than the analyst's previous forecast of $35.
Vivek Arya said in the investor report that not only is Nvidia's sales growing faster than any other major company, but FCF's profit margin is also extremely high, over 57%. At this rate, Nvidia is likely to generate more than $120 billion in free cash flow over the next two years and more than $200 billion in free cash flow over the next three years. Second, Nvidia's operating expenses have increased by more than 40% (while most chip peers are limiting operating expenses), which helps maintain its strong competitive position. Every dollar of sales Nvidia generates more than 50 cents of free cash flow, which is likely to result in higher shareholder returns.
Second, a number of analysts highlighted Nvidia CEO Hwang In-hoon's remarks. On the earnings call, Hwang In-hoon said, “The next industrial revolution has begun,” and confidently stated “We are ready for the next wave of growth.”
Dan Ives, senior analyst at Wedbush, said that business demand related to artificial intelligence is growing at an accelerated pace. “With the advent of the fourth industrial revolution, more and more businesses and consumers are rapidly embarking on this path. Nvidia AI GPU chips are essentially the new gold or new oil for the tech industry.” “The global AI revolution began with Nvidia, and in our opinion, the AI party has just begun and the popcorn is ready.”
Furthermore, Nvidia announced a major 10-1 stock split and a drastic increase in dividends. These measures will further boost its share price increase.
According to Futu data, Wall Street investment institutions are very optimistic about Nvidia's future market trends. Of the 44 analysts who participated in the rating, more than 90% recommended “buy” and those with no “sell” rating; the average target price is expected to be $1166.15, which has more than 12% potential increase compared to the current latest closing price ($1037.99).
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