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Nvidia Shares Rally on Raised Outlook

Shares of Nvidia, a maker of graphics and tablet chips, jumped Wednesday after it said sales were growing faster than expected.

Nvidia
Jacob Kepler | Bloomberg | Getty Images
Nvidia

The stock jumped almost 10 percent to lead the S&P 500 gainers.

Late Tuesday, Nvidia said it expects revenue of $4.7 billion to $5 billion for the fiscal year that begins Jan. 30, well above the $4.4 billion that analysts polled by FactSet expect on average.

Nvidia CEO Jen-Hsun Huang said the company expects growth in both graphics chips and chips for tablets and smartphones.

Romit Shah of Nomura Securities noted that Nvidia's processors go into 70 percent of the tablets that run Google's Android software, in competition with Apple's iPad. But like other analysts, he was not impressed with the raised outlook.

"Although we believe the company is well positioned in the long term, we are not updating our estimates due to the ongoing macro weakness and the lack of substantial competition to Apple from Android tablets," Shah wrote in a morning note.

Vijay Rakesh at Sterne Agee said Nvidia raising its expectations looked premature. The company is facing a lot of competition in tablets and smartphones, and lacks the ability to bundle its processors with chips that can handle connectivity to 3G networks like Qualcomm can.