Nvidia Stock Surges as Generative AI Charges Wall Street Outlook

Nvidia Stock Surges as Generative AI Charges Wall Street Outlook

By:Thomas Westwater

Nvidia Q1 Fiscal Results Send Stock Price Surging

Nvidia stock is trading about 25% higher after the U.S. GPU maker reported its first-quarter financial results after the close on Wednesday. Diluted earnings per share (EPS) for Q1 crossed the wires at $1.09 (non-GAAP) on $7.19 billion in revenue, down 20% and 13% from a year ago, respectively.

Revenue from the company’s data center rose 14% from last year and 18% from the prior quarter to a record $4.28 billion. Gaming revenue fell 38% from last year but rose 22% from a quarter ago to $2.24 billion. The automotive segment revenue hit $296 million, another record-breaking figure after rising 114% from a year ago.

Artificial Intelligence Boom Primes Nvidia for Growth

Investors were most impressed by second-quarter guidance, with Nvidia expecting a bullish $11 billion in revenue, give or take 2%. That exceeded Wall Street estimates of about $7.3 billion, and it speaks to the generative artificial intelligence revolution sparked by OpenAI’s ChatGPT.

Nvidia’s GPUs are the preferred chip to power AI models, positioning the company to capitalize on future growth compared to rivals like Intel and AMD. Analysts were quick to double down on their bullish outlooks, and Jensen Huang, CEO and founder, said:

“A trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process.”

Bulls in Control After Nvidia Hits New All-Time High

The bulls remain in control of price action after prices pierced the previous all-time high in late 2021. Technically, there is little to suggest that a trend reversal will occur, but a short-term pullback is possible after the gap higher on possible profit taking.

That said, a pullback would likely see some support around the prior May high of $318.28 as traders reenter their positions. An uninterrupted continuation is also on the cards, with the Relative Strength Index (RSI) signaling strong momentum at the 83 level, its highest of the year.

For options traders that see the stock price taking a breather for a bit and remaining above the prior May high but below today’s prices would likely employ straddles. However, traders should keep in mind that the potential for market volatility is high amid ongoing U.S. debt ceiling negotiations, which could put a short straddle trade at risk.

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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