Investing

Nvidia shares surge after earnings show big cryptocurrency, gaming demand

Key Points
  • Analysts are loving Nvidia's better-than-expected fiscal fourth-quarter earnings and guidance.
  • "Overall, all of the necessary items were 'meet or exceed' with the most impressive part being the guidance," RBC Capital Markets' analyst writes.
Jensen Huang, CEO of Nvidia
Rick Wilking | Reuters

Nvidia shares rose as Wall Street is growing more optimistic on the company's opportunities in key growth markets.

The chipmaker reported better-than-expected fiscal fourth-quarter earnings and guidance Thursday. Nvidia's biggest business segment, gaming, produced $1.74 billion in revenue, above the FactSet estimate of $1.54 billion. The second largest area, data center, came up with $606 million in revenue, above the consensus estimate of $552.1 million.

Nvidia shares rallied 6.7 percent Friday. The stock rose despite a troubling overall market environment right now that saw the Dow Jones industrial average drop more the 1,000 points twice this week.

"We reiterate our outperform rating on NVIDIA and are raising our price target … following yet another exceptionally strong quarter and guidance," Raymond James analyst Chris Caso wrote in a note to clients Thursday entitled "NVIDIA Does It Again - Another Amazing Beat/Raise." "The stock's valuation is of course high, but as long as the company keeps putting up quarters like this, and with future potential catalysts from Auto and inferencing ahead, we believe shares will continue to move higher."

Caso raised his price target on Nvidia shares to $275 from $250, representing 26 percent upside to Thursday's close.

Nvidia shares are significantly outperforming the market. The stock is up 87 percent in the past 12 months through Thursday compared with the S&P 500's 12 percent gain. That performance ranks No. 3 in the entire S&P 500.

One Wall Street firm is stunned over Nvidia's strong guidance for the next quarter.

RBC Capital Markets reiterated its outperform rating on the company's shares, citing optimism over its data center business.

"Overall, all of the necessary items were 'meet or exceed' with the most impressive part being the guidance suggesting another material quarter of Data Center growth," analyst Mitch Steves wrote in a note to clients Thursday. The company had "a blow out quarter and guidance well ahead of expectations [and] marches EPS towards $2.00+ EPS run-rate a quarter earlier."

Steves increased his price target to $280 from $250 for Nvidia shares.

KeyBanc Capital Markets pointed to the strength in the cryptocurrency mining market as a big driver of Nvidia's performance.

Digital currency miners use graphics cards from AMD and Nvidia to "mine" new coins, which can then be sold or held for future appreciation.

"Strong GPU [graphics processing unit] demand from the cryptocurrency mining market has rapidly depleted excess channel inventory and buoyed strong sales, which offsets our prior concerns on gaming segment growth," analyst Michael McConnell wrote in a note to clients Thursday.

— CNBC's Michael Bloom contributed to this story.

Disclaimer