Nvidia's Immunity Boost Should Last -- Heard on the Street
By Dan Gallagher
The only problem with clearing a high bar is when the bar keeps
Nvidia's results for the fiscal first quarter late Thursday
definitely accomplished the former. The chipmaker's data center
revenue surged 80% from a year earlier to cross the $1 billion mark
for the first time. That exceeded Wall Street's already high
projections and was especially impressive for a period that
included the worst initial impacts of the coronavirus pandemic.
The April-ending quarter opened with chip factories in China
shut down and later included Nvidia's largest customers like
Amazon.com, Google and Microsoft rushing to send their employees
home while trying to keep their own operations running
But fortunately for Nvidia, those operations increasingly rely
on the artificial intelligence chips the company designs for data
centers. And those chips got an important upgrade with the
company's new Ampere product line that was announced last week but
was already selling during the quarter.
Tim Arcuri of UBS characterized Ampere as the biggest
generational leap in "computational horsepower" in the company's
history that also expands Nvidia's opportunity in the field of
inference -- a segment of artificial intelligence computing that is
believed to have a much larger market opportunity than AI training
where Nvidia has been historically strong.
Nvidia chief financial officer Colette Kress said Thursday that
all major cloud service operators are already deploying its Ampere
chips in their systems.
That should give Nvidia legs even if those large customers
moderate their capital expenditures later this year. Those tech
giants aren't immune to the broader economy, but all have a
pressing need to keep their data center networks on the cutting
edge, given skyrocketing demand from both corporations and
consumers for remote services such as videoconferencing, gaming and
Google-parent Alphabet Inc. said on its earnings call last month
that investments in technical infrastructure would remain "at
roughly the same level" as the prior year despite declines in other
areas such as real estate spending.
Nvidia will need all the help it can get. The company's strong
results inspired analysts to boost their targets, bringing the
Street's consensus forecast for data center revenue up 14%
overnight to about $5.3 billion for Nvidia's current fiscal year,
according to FactSet.
That would represent a 79% jump for the year and put data
centers close to overtaking videogaming as the company's largest
business segment. With the stock up more than 50% for the year
already -- and at nearly 44 times forward earnings -- investors
aren't exactly making the company's task easier.
Write to Dan Gallagher at firstname.lastname@example.org
(END) Dow Jones Newswires
May 22, 2020 13:14 ET (17:14 GMT)
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