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Will NVIDIA Secure Investors’ Money Amid a Volatile Market?

Story Highlights

NVIDIA topped analysts’ expectations in the first quarter of Fiscal 2023. Meanwhile, a weak outlook shook investors’ confidence.

NVIDIA Corporation (NASDAQ: NVDA) posted better-than-expected results for the first quarter of Fiscal 2023. Strong revenue recorded by the pioneer of GPU-accelerated computing at its Gaming and Data Center platforms acted as tailwinds. 

Despite the beat, shares plunged 6.82% in extended trading on Wednesday after the chipmaker provided a disappointing outlook. COVID-related manufacturing shutdowns in China and the impact on business in Russia were cited as reasons for the weak outlook. 

Results in Detail 

NVIDIA reported Q1 adjusted earnings of $1.36 per share, up 49% on a year-over-year basis, and handily beat the Street’s estimates of $1.30 per share. Revenue climbed 46% to $8.29 billion and beat analysts’ expectations of $8.12 billion. 

Gaming, Data Center, and Professional Visualization platforms recorded a 31%, 83%, and 67% year-over-year surge in revenues. Meanwhile, the Automotive platform recorded a 10% drop in revenue. 

Capital Deployment 

During the first quarter, NVIDIA returned $2.10 billion to shareholders in the form of share repurchases and cash dividends. 

Recently, the company’s board increased the company’s common stock repurchase program to a total of $15 billion through December 2023. 

Official Comments 

Encouragingly, NVIDIA CEO Jensen Huang said, “The effectiveness of deep learning to automate intelligence is driving companies across industries to adopt NVIDIA for AI computing. Data Center has become our largest platform, even as Gaming achieved a record quarter.” 
 
Looking forward, Huang said, “We are gearing up for the largest wave of new products in our history with new GPU, CPU, DPU, and robotics processors ramping in the second half. Our new chips and systems will greatly advance AI, graphics, Omniverse, self-driving cars and robotics, as well as the many industries these technologies impact.” 

Outlook  

For the second quarter of the Fiscal Year 2023, the company projects revenue of $8.1 billion (+/-2%), lower than the consensus estimate of $8.4 billion. This includes the negative impact of about $500 million associated with Russia and the COVID lockdowns in China. 

Wall Street’s Take 

Following the Q1 results, Piper Sandler analyst Harsh Kumar reiterated a Buy rating but lowered the price target to $250 (47.28% upside potential) from $350. 

Kumar believes that headwinds experienced by NVIDIA are “transitory.” He expects the situation to improve once COVID stabilizes in China.

Shares of NVIDIA have rallied 8.2% over the past year, while the stock still scores a Strong Buy consensus rating, based on 22 Buys versus five Holds. That’s alongside an average NVIDIA price target of $305.08, which implies 79.72% upside potential to current levels. 

Hedge Funds  

TipRanks’ Hedge Fund Trading Activity tool shows that confidence in NVIDIA is currently Very Positive, as the cumulative change in holdings across all 42 hedge funds that were active in the last quarter was an increase of 1.3 million shares. 

Bottom-Line 

Amid the current uncertain economic environment, NVDA stock has performed admirably over the previous year, posting a gain of 8%. Given the company’s long-term growth prospects, high analyst ratings, and hedge fund managers’ confidence, investors could consider this an attractive buying opportunity. 

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