Fast Money Blog- 5/24/24

This was a topsy-turvy week on Wall Street, but the Dow rebounded to close out the week and Nvidia soared after posting their earnings for the quarter ending on April 28th. 

Here's how the story played out: This past Wednesday, May 22nd, Nvidia, Inc. (NVDA) released outstanding Q1 2025 earnings with top-line revenue of $26 billion, up 262% from a year ago. 

That is unusual and extraordinary!

The revenue comes from several divisions but here are the highlights:

Data center sales, which include the AI chips and additional parts needed to run big AI servers, came in at a record $22.6 billion, a rise of 427% year-over-year and 18% quarter-over-quarter. 

Q1 Gaming revenue was $2.6 billion, down 8% from the previous quarter, but up 18% from a year ago. 

Automotive revenue increased 11% year-over-year and 17% quarter-to-quarter to $329 million, which is the highest result in a couple of years. 

Moreover, NVDA reported net income for the quarter of $14.88 billion, a rise of $628%, year-over-year.

For any tech stock, NVDA's growth is exceptional. It is this unprecedented revenue growth that is causing demand for share ownership.

Tyrone, why is NVDA so dominant?

NVDA is so dominant because companies and countries are partnering with Nvidia to shift traditional data centers to accelerated computing and build a new type of data center, using AI. And the demand goes beyond cloud service providers, as generative AI is now being used by a multitude of consumer internet companies and automotive and healthcare customers, among others, creating multiple multibillion-dollar vertical markets for Nvidia. 

For your information: Traditional AI excels at analyzing data and performing specific tasks (detecting patterns, generating insights, automation, and prediction), while generative AI focuses on creating new content like text, images, and music. 

Currently Nvidia is working on a new chip that forms the foundation for a major breakthrough in AI. This new platform is called Blackwell and will be available starting later in the year. 

Among the many organizations expected to adopt Blackwell are Amazon Web Services, Dell Technologies, Google, Meta, Microsoft, OpenAI, Oracle, and Tesla. 

It is extremely rare for all 5 of these top-tier companies to partner with a company that until about 15 years ago, only specialized in graphics and gaming. 

Along with their earnings, Nvidia announced plans to split its stock 10-for-1 and begin trading on a split-adjusted basis on June 10th.

The company also bought back $7.7 billion worth of its shares and paid $98 million in dividends during the quarter. Not only that, but Nvidia raised its quarterly cash dividend from 4 cents per share to 10 cents on a pre-split basis.

Again, the revenue growth we are seeing in Nvidia shares is unprecedented.  Alongside the companies they are partnering with, Nvidia is well poised for exceptional growth within the next 36 months.

I recommend that members of the WI program begin to build a small position post-split.Stay Open and Stay Positive!

Tyrone Jackson, The Wealthy Investor