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NVIDIA (NVDA) Spikes 5.6% on Upbeat Q1 Revenue Forecast

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Zacks Equity Research
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NVIDIA Corporation NVDA stock gained 5.6% on Monday after the company predicted that its first-quarter fiscal 2021 revenues would exceed the previous guidance. The graphic chip maker also unveiled a new product —a central processing unit (CPU) — specifically designed for data centers, also provided reason for investors to cheer.

Q1 Sales to Exceed Expectations

During its annual GPU Technology Conference (GTC) event, NVIDIA’s CFO Colette Kress said that the company is on track to report first-quarter 2021 revenues above management’s earlier expectations of $5.3 billion. The CFO stated that the company is witnessing broad-based strength with all of its segments driving upside to initial outlook.

Kress noted, “Overall demand remains very strong and continues to exceed supply while our channel inventories remain quite lean. We expect demand to continue to exceed supply for much of this year. We believe we will have sufficient supply to support sequential growth beyond Q1.”

The company is expecting another impressive year for its data-center business as industries are increasingly using artificial intelligence (AI) to improve their products and services. Moreover, the company now projects the first-quarter sales from the new CMP product for industrial-scale cryptocurrency mining chips to be $150 million, up from the previous estimate of $50 million.

NVIDIA Corporation Price

NVIDIA Corporation Price
NVIDIA Corporation Price

NVIDIA Corporation price | NVIDIA Corporation Quote

Notably, NVIDIA is benefiting from the pandemic-induced work-from-home and learn-at-home wave. Stellar growth in GeForce desktop and notebook GPUs is boosting demand for its graphic chips. Furthermore, better visualization and speed are needed for a thrilling gaming experience, which NVIDIA successfully provides through its portfolio of Pascal architecture-based GPUs.

Additionally, a surge in the Hyperscale demand is a tailwind for the company’s data-center business. Further, solid uptake of AI-based smart cockpit infotainment solutions is a boon.

CPU for Data Centers

Apart from updating the first-quarter revenue outlook, NVIDIA surprised investors by unveiling its first CPU, Grace, specifically designed for data centers. The company claims that it will deliver 10 times greater performance than the present day’s fastest servers that run AI applications and high-performance computing workloads.

The new processors will help NVIDIA better compete with its chief rivals — Intel INTC and Advanced Micro Devices AMD — which dominate the data-center market with their x86-based processors.

The Grace CPU is based on technology from Arm Holdings, which is being acquired by NVIDIA. Markedly, last September, NVIDIA inked an agreement to acquire Arm from its existing owner, Softbank Group, in a cash-and-stock deal worth $40 billion.

The Arm Holdings acquisition is anticipated to aid NVIDIA in offering an end-to-end ecosystem of technology across the data center, IoT, autonomous vehicles and mobile domains. The company is now well poised to upscale its inference technology, drivers, and accelerators by utilizing Arm’s robust architecture and chip designs.

NVIDIA currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Another similar-ranked stock in the broader technology sector is Dropbox DBX. The long-term earnings per share growth rate for Dropbox is 40.9%.

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