Nvidia reports another very strong quarterly earnings. Will AI boom rise even further?

Nvidia's quarterly results, although they turned out to be record-breaking, blowing away Wall Street expectations, did not bring euphoria to the stock market. The stock cheapened almost 5% in the first reaction, and an hour after the publication, after the market stabilized, it was 2% lower. However, tomorrow market reaction at opening is still hard to predict, investors seem to be looking to the future today with some (maybe unwarranted) uncertainty, watching the company's record growth forecasts and comments on the growing prospects of the AI business.

Nvidia reported $35.1 billion in revenue against $32.8 billion forecasts and $0.78 in earnings per share, while Wall Street expected $0.74 expectations. However, in the current quarter, it already estimates that revenues will definitely exceed $37 billion. One thing is certain: investment in AI infrastructure will continue, and the Nvidia report showed that more companies are increasing investment in artificial intelligence. We're talking about companies such as Accenture, but also Foxconn, Lenovo, Toyota and India's Reliance Industries.

However, this does not mean that Nvidia's capitalization will grow indefinitely. The biggest obstacle for the company here seems to be a slowdown in the global economy (which we haven't seen so far, at least not in its key business partners like Microsoft, Meta or Google) or a conflict over Taiwan. Admittedly, both of these prospects are an abstraction for the market today. The future will show whether the market was too short-sighted.

Currently, Nvidia is diversifying its business from data centers to gaming, automotive and industrial, and all of its business segments have seen growth, both quarterly and year-over-year. Revenues grew 94% year over year, with sales in the data center segment up 112% and net income up 111% year over year. These numbers speak for themselves.

The company will retain a fair amount of pricing power for quite some time to come, looking at its growth momentum. Its competitors have not actually woken up from their technological slumber yet. Nvidia also reassured the market by saying that shipments of Blackwell AI chips will begin in Q4, this year and accelerate next year. However, it hinted that their supply could be limited due to design challenges, leaving room for markets to speculate 'how much', as this could naturally lead to some stagnation in sales momentum.

Customers could wait longer and wait until Nvidia is able to offer them more modern, more powerful GPUs. We also don't know under what economic circumstances it would be able to scale their production satisfactorily. On the other hand, the company is confident that demand for Blackwell will grow through 2025 and exceed available supply. In addition, the outlook is optimistic about the business prospects in the industrial market (IoT), 5G, robotics, or quantum computing

This suggests that the company will successfully “carry costs” and perhaps elevator GPU prices. In conclusion, Nvidia's shares are expensive, but the company is “commanding” and proves once again that it is the leader of the AI bull market. It is hard to imagine today that this trend will continue without the appreciation of its shares.... But the stock market has already experienced no such abstract phenomena in its history. One thing is certain. Nvidia will be as strong as its biggest customers, and investors' eyes will be looking towards the largest Silicon Valley companies. As for now, fundamentals are still very strong.

Eryk Szmyd XTB Financial Markets Analyst