NVIDIA Corporation (NVDA) has recently unveiled its third-quarter earnings, achieving remarkable results that exceeded industry expectations. The company reported a staggering revenue of $35.1 billion, marking a 94% increase compared to the same quarter last year and a 17% rise from the previous quarter. This strong financial performance resulted in an adjusted earnings per share (EPS) of $0.81, surpassing the projected figures of $33.2 billion in revenue and $0.74 EPS proposed by analysts.
The questions surrounding the accuracy of analysts’ predictions stem from previous earnings. Three months ago, NVDA’s shares were priced at $125, and the company reported a revenue of $30 billion, up 122% year-over-year and 15% quarter-over-quarter. At that time, NVDA anticipated revenues of around $32.5 billion for the third quarter; however, after the earnings announcement, the stock experienced a significant decline but later rebounded to close above $145. Over the past three months, the stock has returned approximately 16%, closely mirroring NVDA’s revenue growth rate for the quarter.
The latest report indicates that NVDA not only met but surpassed its guidance, with revenue growth accelerating from 15% to 17%. The company also provided an optimistic outlook, projecting revenue of $37.5 billion for the current quarter. There is a strong expectation that NVDA could generate over $40 billion in quarterly revenue soon, which could further drive its share price up by an additional 16-17% in the next three months, potentially reaching $170.
NVIDIA’s success has been notable, particularly within the AI sector, which continues to show robust demand for its chips. As co-founder and research director of Insider Monkey, I have recommended a long position in NVDA since May 2023, benefiting our subscribers with positive returns. While I affirm my belief in NVDA’s short-term potential, I remain cautious about its long-term investment viability, given its current market cap nearing $3.6 trillion. Analysts estimate that if the stock continues to perform well, it could surpass a market cap of $4 trillion within three months, raising questions about whether NVDA can sustain a quarterly profit surge from $19.3 billion to $50 billion.
In summary, while NVIDIA’s current trajectory appears promising, and the stock shows potential for short-term gains, prospective investors should consider other AI stocks with greater long-term growth prospects that have more attractive valuations. This balanced approach will help mitigate risks associated with investing in high-growth tech stocks.
Overall, the continued strength in NVIDIA’s performance highlights the immense potential within the AI market, as companies push toward innovation and advancement.