Technology stocks saw a surge in 2023, thanks to the excitement surrounding artificial intelligence (AI). The trend continued into early 2024, but some experts caution that the AI space might be overhyped and could lead to a bubble.
Market participants were eagerly awaiting the quarterly financial results of AI-chip giant NVIDIA Corp. (NVDA). After the market closed on Feb 21, the company announced impressive fourth-quarter fiscal 2024 earnings, along with strong guidance suggesting that the AI boom will persist.
The AI market has been growing rapidly, fueled by the increasing adoption of digital technologies and the Internet. The COVID-19 pandemic, with its emphasis on social distancing and lockdowns, accelerated the reliance on the Internet and digitization for survival.
This demand led technology giants to invest heavily in R&D, particularly in the high-end AI sector, which saw significant interest from various industries such as automotive, healthcare, finance, manufacturing, food, logistics, and retail.
NVIDIA’s recent quarter results reflect this trend, with adjusted earnings exceeding expectations and revenue surpassing estimates. The company’s performance was robust despite facing challenges in the Chinese market due to export restrictions imposed by the U.S. government.
The company’s management provided positive guidance, indicating a strong outlook for growth in the coming years driven by demand from various sectors such as enterprise software, consumer internet applications, automotive, financial services, and healthcare.
NVIDIA, a pioneer in visual computing technologies and GPU innovation, has transitioned from PC graphics to AI-based solutions supporting high-performance computing, gaming, and virtual reality platforms.
The company’s A100 and H100 AI chips are widely used for building and running AI applications, including projects like OpenAI’s ChatGPT, positioning NVIDIA as a leading provider of generative AI chipsets.
NVIDIA is expected to benefit from the strong demand for its Hopper chips and the industry shift towards NVIDIA accelerators. Despite improving chip supply, demand is likely to outpace supply, leading to potential price increases.
The AI market’s growth trajectory is significant, with projections estimating it to reach nearly $2 trillion by 2030 from its current size of $200-$300 billion. NVIDIA’s stock price has surged, with a 16.4% jump following the latest earnings report, and the company holds a Zacks Rank #1 (Strong Buy).
Image Source: Zacks Investment Research
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Following NVIDIA’s earnings report, the semiconductor sector also experienced gains, with stocks like Advanced Micro Devices Inc. (AMD), Taiwan Semiconductor Manufacturing Co. Ltd. (TSM), Broadcom Inc. (AVGO), and QUALCOMM Inc. (QCOM) showing positive price movements.
The chart below illustrates the year-to-date price performance of these stocks:
QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report
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