How Investors Can Seize Opportunities in NVDA Amid Market Volatility

Posted on by The INO.com Team

According to Todd Gordon, the founder of Inside Edge Capital, NVIDIA Corporation (NVDA) is a strong buy despite a recent pullback. The chart analyst also set a target price of $1,150 for the stock.

“I say that NVDA is just resting its legs gearing up for another move, but this time it's bringing more friends along for the run. There are quite a few different names in the semi-industry setup in a similar fashion telling me that once again the chips are ready to rip,” Gordon said.

Moreover, on March 13, Bank of America maintained its buy rating on NVDA and raised its price target from $925 to $1,100. As per BofA analyst Vivek Arya, Nvidia is expected to dominate the $90 billion accelerator market in 2024, unaffected by Google’s new CPU launch.

Last month, CNBC’s Jim Cramer suggested investors welcome an impending pullback. “I think people are right to expect a pullback here,” Cramer said. “But that’s not a reason to head for the hills. Instead, you want to raise a little cash, watch the market broaden — as it is doing — and then buy your favorite tech stocks when they come down.”

In Particular, Cramer said there may be an attractive opportunity to invest in one of his favorite stocks, NVDA. He hinted at his continued support for the tech giant over the years, even when the stock witnessed significant losses. While some on Wall Street might be growing weary of AI, Cramer emphasized that the future “runs on Nvidia.”

“If you don’t own Nvidia already, you know what? You’re about to get a sale,” he stated. “And if you do own it already, just stick with it, because it’s way too hard to swap out and then swap back in at the right level.”

Shares of NVDA have surged more than 75% year-to-date and nearly 223% over the past year. However, the stock has plunged around 3% over the past month.

Now, let’s discuss in detail factors that could influence NVDA’s performance in the near term:

Fourth-Quarter Beat on Revenue and Earnings

The chip giant reported fourth-quarter 2024 earnings that beat analysts’ expectations. For the quarter that ended January 28, 2024, NVDA’s non-GAAP revenue came in at $22.10 billion, surpassing analysts’ estimate of $20.55 billion. This compared to revenue of $6.05 billion in the same quarter of 2022.

The company posted a record revenue from the Data Center segment of $18.4 billion, up 409% from the year-ago value. NVIDIA achieved significant progress in this business segment. In collaboration with Google, NVDA launched optimizations across its data center and PC AI platforms for Gemma, Google’s groundbreaking open language models.

Further, the company expanded its partnership with Amazon Web Services (AWS) to host NVIDIA® DGX™ Cloud on AWS.

Regarding technological innovations, NVIDIA introduced several groundbreaking solutions, including NVIDIA NeMo™ Retriever. It is a generative AI microservice that enables enterprises to connect custom large language models with enterprise data, delivering highly accurate responses for various AI applications.

Additionally, NVIDIA launched NVIDIA MONAI™ cloud APIs, facilitating the seamless integration of AI into medical-imaging offerings for developers and platform providers.

The company’s Gaming revenue for the quarter was $2.90 billion, up 56% year-over-year. Talking about recent developments in the Gaming division, NVIDIA launched GeForce RTX™ 40 SUPER Series GPUs, starting at $599, featuring advanced RTX™ technologies such as DLSS 3.5 Ray Reconstruction and NVIDIA Reflex for enhanced gaming experiences.

The company also introduced microservices for the NVIDIA Avatar Cloud Engine, enabling game and application developers to integrate state-of-the-art generative AI models into non-playable characters, enhancing immersion and interactivity in virtual worlds.

NVIDIA’s non-GAAP operating income increased 563.2% year-over-year to $14.75 billion. Also, the company’s non-GAAP net income grew 490.6% from the previous year’s period to $12.84 billion. It reported non-GAAP earnings per share of $5.16, compared to the consensus estimate of $4.63, and up 486% year-over-year.

Furthermore, the company’s non-GAAP free cash flow was $11.22 billion, an increase of 546.1% from the previous year’s quarter. Its total current assets stood at $44.35 billion as of January 28, 2024, compared to $23.07 billion as of January 29, 2023.

During a call with analysts, Nvidia CEO Jensen Huang addressed investor concerns regarding the company's ability to sustain its current growth or sales levels throughout the year.

“Fundamentally, the conditions are excellent for continued growth” in 2025 and beyond, Huang told analysts. He added that the continued demand for the company’s GPUs would persist, driven by the adoption of generative AI and an industry-wide shift from central processors to Nvidia's accelerators.

For the first quarter of fiscal 2025, NVIDIA expects revenue of $24 billion. The company’s non-GAAP gross margin is expected to be 77%.

Recent Announcement of AI Chips During Nvidia GTC AI Conference

NVDA announced a new generation of AI chips and software tailored for running AI models during its developer's conference at SAP Center on March 18 in San Jose, California. This announcement underscores the chipmaker’s efforts to solidify its position as the go-to supplier for AI companies.

The new generation of AI graphics processors is named Blackwell. The first Blackwell chip is the GB200 and is anticipated to ship later this year. It will also be available as an entire server called the GB200 NVLink 2, combining 72 Blackwell GPUs and other Nvidia parts designed to train AI models. NVIDIA is enticing customers by offering more powerful chips to spur new orders.

The announcement comes as companies and software makers still scramble to get their hands on the current “Hopper” H100s and similar chips.

“Hopper is fantastic, but we need bigger GPUs,” Nvidia CEO Jensen Huang said at the company’s developer conference.

Further, the tech giant unveiled revenue-generating software called NIM, which stands for Nvidia Inference Microservices, to its Nvidia enterprise software subscription. NIM simplifies using older Nvidia GPUs for inference or running AI software and will enable companies to leverage the hundreds of millions of Nvidia GPUs they already own.

According to Nvidia executives, the company is transitioning from primarily being a mercenary chip provider to becoming more of a platform provider, like Microsoft Corporation (MSFT) or Apple Inc. (AAPL), on which other firms can build software.

Analysts at Goldman Sachs retained a buy rating of NVDA stock and raised their price target to $1,000 from $875. They expressed “renewed appreciation” for Nvidia’s innovation, customer and partner relationships, and vital role in the generative AI space after the company’s keynote.

“Based on our recent industry conversations, we expect Blackwell to be the fastest ramping product in Nvidia’s history,” the analysts said. “Nvidia has played (and will continue to play) an instrumental role in democratizing AI across many industry verticals.”

Bottom Line

NVDA surpassed Wall Street’s estimates for earnings and sales in the fourth quarter of fiscal 2023. The chipmaker has significantly benefited from the recent technology industry obsession with large AI models, which are developed on its pricey graphics processors for servers.

Moreover, sales reported in the company’s Data Center business comprise most of its revenue. NVDA’s Data Center platform is driven by diverse drivers like demand for data processing, training and inference from large cloud-service providers, GPU-specialized ones, enterprise software, and consumer internet companies.

Further, vertical industries, led by automotive, financial services, and healthcare, are now at a multibillion-dollar level.

The data center GPU market is projected to be worth more than $63 billion by 2028, growing at a staggering CAGR of 34.6% during the forecast period (2024-2028). The increasing adoption of data center GPUs in enterprises should bode well for NVDA.

Analysts expect NVDA’s revenue and EPS for the fiscal 2025 first quarter (ending April 2024) to increase 237.7% and 405.9% year-over-year to $24.29 billion and $5.51, respectively. Moreover, the company has topped consensus revenue and EPS estimates in all four trailing quarters, which is remarkable.

Furthermore, for the fiscal year ending January 2025, the company’s revenue and EPS are expected to grow 83% and 92.1% from the prior year to $111.49 billion and $24.89, respectively.

NVDA has achieved significant progress across its business divisions, and this year, it will bring new product cycles with exceptional innovations to help boost its industry forward.

Since the AI boom began in late 2022, catalyzed by OpenAI’s ChatGPT, Nvidia’s stock has been up fivefold, and its total sales have more than tripled. The company’s high-end server GPUs are essential for training and deploying large AI models. Notably, tech companies like MSFT and Meta Platforms, Inc. (META) have spent billions of dollars buying these chips.

Recently, the chipmaker announced a new generation of AI chips and software for running AI models, giving customers another reason to stick to Nvidia chips over a growing field of competitors, including Advanced Micro Devices, Inc. (AMD) and Intel Corporation (INTC).

While NVDA’s stock has declined nearly 3% over the past month, several analysts affirmed their bullish sentiment toward the stock and see a significant upside potential, owing to its booming AI business and new innovative launches to maintain its leading position in the face of rising competition.

Given these factors, investors could consider buying NVDA for potential gains.

Identifying Opportunities in Bitcoin Amidst Market Turmoil

Posted on by The INO.com Team

The cryptocurrency market experienced heavy selling last week amid an unprecedented Iranian drone and missile attack on Israel. Bitcoin (BTC) was down nearly 8% late on Saturday as U.S. officials confirmed the ongoing attack. As one of the few risk assets trading over the weekend, digital coins reacted immediately to the escalating tensions in the Middle East.

The crypto market also faced a decline following recent data reported earlier last week that showed inflation well above the Fed's 2% target in the first quarter of the year, which was not conducive to market sentiment.

Bitcoin, which had been trading around $70,000 on Saturday evening, dropped below $62,000, according to data from the Bitstamp exchange. By Sunday morning, it had recovered slightly, trading above $64,000. Other cryptocurrencies like Ether (ETH) also saw heavy selling, falling by up to 10% in certain cases.

Zaheer Ebtikar, founder of the crypto fund Split Capital, said the crypto sell-off would continue to be “contingent on further escalation” and that people would wait to see how markets react before making more moves. He added that leverage “has gotten completely overwhelmed in the last three days, so that’s caused prices to materially deteriorate” in digital assets.

The sell-off for bitcoin marked the most significant drop in more than a year, as reported by Bloomberg, with the coin recently setting new records, driven by inflows into U.S. spot bitcoin ETFs that continue to drive the crypto’s price action.

In January this year, the U.S. Securities and Exchange Commission (SEC) approved 11 spot bitcoin ETFs, which helped make investing in the cryptocurrency more accessible by bringing more investors and assets into the crypto space.

Over the past few months, the market has benefited from billions of dollars of inflows to Bitcoin ETFs, and these significant inflows supported Bitcoin’s price surge above $73,000 around mid-March. Spot bitcoin ETF amassed net inflows of around $12.1 billion at the first-quarter end, as per BitMEX Research.

Blackrock’s iShares Bitcoin Trust (IBIT) has emerged as the top performer so far, accumulating more than $13.9 billion in inflows since trading began in January. However, Grayscale Bitcoin Trust (GBTC) is a key outlier with flow data, experiencing outflows of around $14.7 billion due to the relatively high fees associated with the offering.

Most Anticipated Crypto Event: The Bitcoin Halving

Investors in the cryptocurrency market are eagerly looking forward to the upcoming Bitcoin halving, scheduled to occur on April 20, which could potentially bring positive developments. This event will reduce the rate at which new coins are generated and thus lower the available amount of new supply, cutting mining rewards to 3.125 BTC.

Bitcoin halving roughly occurs every four years. It last halved on May 11, 2020, resulting in a block reward of 6.25 BTC from 12.5 BTC.

The event, the fourth in Bitcoin’s history, with previous halvings in 2012, 2016, and 2020, involves cutting miners’ rewards in half to control the introduction of new bitcoins until the maximum limit of 21 million bitcoins is reached. Historically, halving events have resulted in higher Bitcoin prices.

For instance, the first Bitcoin halving occurred in November 2012, when the block reward was reduced from 50 BTC to 25 BTC, and Bitcoin’s price surged from $12 to over $1000 within a year.

Similar trends were observed following the second halving in July 2026, when the reward was reduced from 25 BTC to 12.5 BTC, and the price climbed from about $600 to a peak of around $20,000 in 18 months. The most recent halving occurred in May 2020.

Although the initial price impact was not as significant as in past halvings, Bitcoin gradually trended upward in the subsequent months. By early 2021, Bitcoin reached unprecedented highs, exceeding $60,000 per coin, marking a five-fold increase from its pre-halving price of approximately $12,000.

Austin Arnold, a crypto market analyst and the founder of “Altcoin Daily,” projected a doubling of Bitcoin’s price within a year post-halving, potentially reaching between $100,000 and $150,000, guided by the fundamental principle of supply and demand dynamics.

Once April began, Bitcoin immediately marched toward the $73,000 mark it hit during the bullish crypto run in March. Almost all predictions made before April revealed this would be the case, as market sentiment grew bullish before the halving. However, the latest drop is scaring some investors.

Navigating Bitcoin's Uncertain Terrain: Strategic Insights for Investors Amid Regulatory Challenges and Price Volatility

Investing in Bitcoin carries inherent risks, primarily stemming from the high volatility of the cryptocurrency market. Price fluctuations can be dramatic and unpredictable, impacted by several factors, from regulatory developments to market sentiment.

Economic downturns, shifts in monetary policy, and geopolitical events can influence investor sentiment toward cryptocurrencies. For instance, bitcoin significantly declined last Saturday due to escalating geopolitical tensions. Following reports of Iran launching a massive air attack on Israel, the price fell from approximately $70,000 to $62,000, a more than 10% drop, with few altcoins declining 15% or more.

However, crypto markets recovered slightly the following day on news Israel and its allies shot down over 99% of the incoming drones, cruise missiles, and ballistic missiles. Also, Bitcoin’s latest crash demonstrates that cryptocurrencies are not even a haven during wartime.

So, an in-depth analysis of how these global factors impact the cryptocurrency market reveals a delicate interplay between economic trends and cryptocurrency valuations, emphasizing the importance of a macroeconomic perspective when investing in Bitcoin.

Tools and methods such as sentiment analysis, monitoring social media, and analyzing trends are used to assess market sentiment. Understanding market sentiment can offer investors valuable insights into potential price movements, as positive sentiment can drive prices up, while negative sentiment can trigger sell-offs.

Also, the increasing trend of institutional investment in cryptocurrencies reshapes the market landscape. This year, bitcoin surged to unprecedented levels with positive sentiment across the market, driven by institutional demand, spot Bitcoin ETFs growth, and the upcoming halving event. Although after hitting new all-time highs in March, it has seen some corrections.

To navigate uncertainties and risks, investors must adopt strategies such as diversification, implementing stop-loss orders, and maintaining a long-term perspective.

Bottom Line

The recent decline in Bitcoin due to geopolitical tensions has highlighted the high volatility of the cryptocurrency market. Over the past few months, the market has primarily benefited from billions of dollars of inflows to spot bitcoin ETFs. The influx of these funds contributed to boosting demand for Bitcoin, leading to a surge in its price that consistently broke records, surpassing $73,000 for the first time in history.

The latest trend reversal in Bitcoin has prompted uncertainty about future market conditions and underscores the importance of cautious investment strategies and risk management in the volatile cryptocurrency space.

It's crucial to closely monitor market trends, sentiment, and regulatory changes while avoiding excessive reliance on leverage, which can magnify losses during downturns. Diversification across different assets and maintaining a long-term perspective can also help mitigate risks and navigate through periods of market turmoil.

Overall, a prudent approach that combines careful analysis, risk assessment, and strategic decision-making is essential for investors looking to weather the challenges and capitalize on opportunities in the crypto market.

Investing in UBER: Evaluating the Case for Long-Term Growth

Posted on by The INO.com Team

Renowned for its ride-hailing service, Uber Technologies, Inc. (UBER) has recently captured much of investors' attention. With its shares surging by an impressive 130% over the past year and almost tripling since the start of 2023, the company also hit a 52-week high of $82.14 last month.

Factors Driving Investor Interest in Uber's Shares

Throughout the tumultuous COVID-19 pandemic, ride-share giants such as UBER encountered formidable challenges. Compounded by continuous losses since its 2019 public debut, UBER faced a rocky road to financial stability.

Nevertheless, a significant turning point occurred last year when, for the first time, the company achieved annual profitability and earned its spot in the S&P 500 Index, meeting the Index’s criteria of positive earnings in the most recent quarters. These two milestones sparked a substantial surge in UBER’s share price.

During the fiscal year 2023, the company reported a 16.9% year-over-year increase in its revenue, amounting to $37.28 billion. Net income attributable to UBER came in at $1.89 billion and $0.87 per share versus a staggering net loss of $9.14 billion and $4.65 per share in the previous year, respectively.

Meanwhile, for the fourth quarter, UBER’s topline witnessed a 15.4% year-over-year jump, reaching $9.94 billion, higher than the analyst estimate of $9.76 billion. Its earnings per share of $0.66 was higher than $0.29 in the prior-year quarter and exceeded the analyst estimate of $0.17.

UBER’s strategic response to stay afloat during the pandemic included cost-cutting measures and a concerted effort to develop its emerging food-delivery segment, which has since evolved into a substantial source of revenue.

In the final quarter of 2023, the company’s Delivery segment posted approximately $3.12 billion in revenue, up 6.4% year-over-year. At the same time, the Mobility segment saw a notable 33.9% year-over-year increase.

Reflecting on UBER’s performance in the fourth quarter and the year 2023, CEO Dara Khosrowshahi emphasized the company's ability to sustain significant, profitable growth. He pointed out the expansion and heightened engagement of UBER’s audience, noting that the platform facilitated an average of nearly 26 million daily trips in 2023.

In the fourth quarter, the company’s gross booking saw notable year-over-year growth of 22%, amounting to $37.58 billion. UBER’s CFO, Prashanth Mahendra-Rajah, attributed the record engagement and accelerated gross bookings in the fourth quarter to the platform's advantages and disciplined investments in new growth avenues.

Further, for the first quarter of fiscal 2024, the management projects gross bookings to range between $37 billion and $38.50 billion, while adjusted EBITDA is expected to come somewhere between $1.26 billion and $1.34 billion.

Bottom Line

UBER has garnered significant attention from investors, propelled by its impressive revenue growth, heightened customer engagement, and notable profitability milestones. This remarkable resurgence from the challenges of 2020 underscores the company's resilience and adeptness in navigating difficult conditions.

In addition to its strong financial performance in its fourth quarter and full-year 2023 results, management’s confidence in UBER’s sturdy financial path is evident from the recent introduction of its inaugural share repurchase program, which allows for the repurchase of up to $7 billion of the company's common stock.

Meanwhile, Wall Street forecasts that UBER’s revenue and earnings per share of $43.34 billion and $1.24 for the fiscal year 2024 indicate an improvement of 16.3% and 42.4% year-over-year, respectively.

Furthermore, as the company gears up to reveal its fiscal 2024 first-quarter earnings next month, UBER remains one of the top choices according to J.P Morgan analyst Doug Anmuth, CFA.

Anmuth remains optimistic about UBER’s potential for ongoing execution and earnings growth, even after milestones such as profitability and S&P 500 inclusion have been attained.

With analysts expressing optimism regarding its earnings growth, UBER’s forward non-GAAP PEG of 0.80x, roughly 51.9% below the industry average of 1.67, indicates that the stock is reasonably priced.

UBER’s attractive valuation, impressive financial performance, and strategic initiatives have positioned it as a compelling investment opportunity with strong long-term growth potential in the ride-sharing and food delivery markets. As the company's first-quarter earnings release draws near, investing in UBER’s shares seems like a wise move for potential gains.

Time to Sell or Buy the Dip? Assessing Alibaba’s Price Action Amid Headwinds

Posted on by The INO.com Team

Commanding a market of roughly $174.86 billion, China’s leading technology giant Alibaba Group Holding Limited (BABA) has faced major headwinds over the past three years, with its shares taking a nosedive of more than 70%. Currently trading below $77, the stock has fallen from its 2020 high of more than $300.

But What Could Have Possibly Caused This Downfall?

Over the past few years, BABA has navigated through a series of obstacles that have significantly hampered its growth trajectory.

In 2021, amid China's sweeping efforts to rein in technology companies, BABA incurred a substantial fine of approximately $2.80 billion, equivalent to roughly 4% of the company's 2019 revenue. This penalty was imposed by Chinese regulators who accused BABA of exploiting its market dominance.

Apart from heightened scrutiny from Chinese regulators, 2023 proved to be a challenging year for BABA, raising uncertainties about the future of the tech giant, particularly as the era of Artificial Intelligence (AI) unfolded.

Last year, the company's strategic plan to list its cloud unit as a separate entity was compelled to undergo reconsideration due to the escalating chip conflict between the U.S. and China.

As the U.S. government intensified restrictions on exporting advanced chips crucial for powering AI models to China, BABA expressed concerns that this could have a substantial negative impact on the operational capabilities of its Cloud Intelligence Group and have a further negative on the company’s profitability.

Additionally, the company recognized that these restrictions could have wider ramifications, potentially hindering their capacity to advance technological capabilities across their various business sectors. These concerns did not sit well with investors, leading to a nearly $20 billion loss in the company's market cap last year.

Furthermore, BABA’s co-founder Joe Tsai recently, during an exchange with Nicolai Tangen, CEO of Norway’s Norges Bank Investment Management, indicated that China is at least two years behind American companies like Open AI, which have emerged as frontrunners in AI.

Tsai suggested that many Chinese tech companies were facing chip shortages, which he described as a significant challenge. However, he pointed out this issue was widely addressed within the industry.

Tsai further highlighted the challenges of conducting business in the U.S., emphasizing the need for caution as a Chinese company. He noted BABA’s limited consumer-facing presence in the U.S., citing concerns about data privacy and cybersecurity.

On top of it, as a retaliatory measure against U.S. restrictions, the Chinese government has directed the country's largest telecom carrier to replace foreign processors with domestic alternatives in its networks by 2027.

This measure is anticipated to hurt a few renowned U.S. chip giants who supplied core processors for network equipment in China. With China aiming to decrease its reliance on U.S. chips, tech companies like BABA are poised to face significant challenges.

Bottom Line

BABA’s fiscal 2024 third-quarter performance painted a mixed picture. Although the topline experienced a modest growth of just 5% year-over-year, reaching $36.67 billion, the company’s non-GAAP net income and non-GAAP EPS declined by 4% and 2% year-over-year to $6.75 billion and $0.33, respectively.

Furthermore, Alibaba’s Taobao and Tmall Group and Cloud Intelligence Group brought in revenue of $18.18 billion and $3.95 billion, witnessing only 3% and 2% year-over-year increases, respectively. The company’s newly appointed CEO, Eddie Wu, emphasized BABA’s focus on driving growth in e-commerce and cloud services.

Wu highlighted that the top priority is to reignite the growth of the core businesses, including Taobao and Tmall Group, through increased investment to enhance user experiences and strengthen market leadership over the next year.

Looking ahead, Wall Street analysts appear optimistic regarding the company's performance for fiscal year 2023, forecasting a 5.5% year-over-year growth in revenue and a 9.4% year-over-year growth in earnings per share.

However, despite the bullish estimates, it is crucial to acknowledge BABA and its peer companies are confronting a complex landscape of regulatory, geopolitical, and technological challenges, signaling a period of significant uncertainty and potential turbulence for the industry in the years ahead.

To make matters worse, weak consumer demand in China isn’t supporting its case either. According to the data released by the National Bureau of Statistics (NBS), China’s consumer inflation cooled more than anticipated in March, alongside persistent producer price deflation, which continues to pressure policymakers to consider further stimulus measures due to weak demand.

Considering BABA’s limited global consumer-facing presence and its Taobao and Tmall Group, which is highly dependent on Chinese consumer spending, the challenging economic environment could pose significant hurdles for the company in the near term.

Overall, despite BABA’s commitment and focus to fuel growth in e-commerce and cloud services, as highlighted by CEO Wu, the company’s growth might be hindered by ongoing macroeconomic headwinds such as weak consumer demand in China, geopolitical tensions, and technological constraints.

To that end, it seems prudent for investors to closely monitor the stock and wait for further developments.

AMD vs. Nvidia: The Battle for Trillion-Dollar Dominance in AI

Posted on by The INO.com Team

The trillion-dollar club, boasting only Amazon.com, Inc. (AMZN), Alphabet Inc. (GOOG), and Meta Platforms, Inc. (META) as its only members, is incredibly exclusive. However, the landscape might soon shift, with another company on the brink of joining the ranks within the next decade.

Advanced Micro Devices, Inc. (AMD), being a stalwart force in driving innovation for over 50 years, particularly in high-performance computing, graphics, and visualization technologies, has now emerged as a formidable contender to NVIDIA Corporation (NVDA) in the AI chip market, signaling a potential shake-up in the industry's hierarchy.

AMD's Growth and Expansion Ventures

AMD stands to benefit significantly from its expansion initiatives, evidenced by the recent unveiling of its MI300 lineup. These data center chips, catering to AI workloads, offer two configurations: the pure GPU MI300X and the combined GPU-CPU MI300A, directly challenging NVDA's dominance.

With NVDA struggling to meet chip demand, AMD has a prime opportunity to capture market share. This sentiment was echoed at the "Advancing AI" event, where industry giants showcased their use of AMD's Instinct MI300X accelerators for cloud and enterprise AI infrastructure, reflecting growing adoption and trust in AMD's offerings.

Moreover, AMD's efforts to expand its AI software ecosystem, exemplified by the ROCm™ 6 software stack optimized for generative AI, have garnered support from key players like Databricks and OpenAI. The collaboration could position AMD as a preferred choice for AI solutions, further enhancing its competitive edge.

The company's commitment to innovation further extends to hardware, with the integration of neural processing units (NPUs) in its Ryzen 8040 Series mobile processors. The advancement, delivering up to 1.6x more AI processing performance, has garnered interest from leading PC OEMs, with new laptops featuring AMD Ryzen 8040 Series processors set to hit the market soon.

Additionally, strategic partnerships, including the one with Microsoft Corporation (MSFT), underscore AMD's role in enabling new services and computing capabilities across various domains, including cloud computing and AI-capable PCs. Such collaborations validate AMD's technology prowess and ability to drive transformative business outcomes.

Furthermore, its collaboration with JR Kyushu Railway Company highlights its foray into AI-driven automation, revolutionizing traditional track inspection methods with the AMD Kria™ K26 System-on-Module.

The deployment highlights AMD's commitment to innovation and its potential to address real-world challenges with AI-powered solutions, further solidifying its position as a critical player in the evolving tech landscape.

AMD’s Robust Financial Performance

AMD's fiscal 2023 fourth quarter showcased remarkable growth across its Data Center and Embedded segments, driven by significant developments. Notably, the company achieved record Data Center segment annual revenue and robust overall growth, buoyed by the rising adoption of Instinct AI accelerators and strong demand for EPYC server CPUs across cloud, enterprise, and AI sectors.

The company’s revenue for the fourth quarter surged by 10% year-over-year to $6.17 billion, fueled by substantial double-digit growth in both the Data Center and Client segments. The remarkable $1.2 billion increase in annual revenue for the Data Center and Embedded segments is of particular significance, which collectively contributed over 50% of the total revenue for 2023.

This surge underlines AMD's success in capturing server market share, driven by the launch of next-generation Instinct AI accelerators and its continued leadership in adaptive computing solutions.

In addition, the company's fourth-quarter non-GAAP gross profit grew 10% year-over-year to $3.13 billion, while operating income was up 12% from the year-ago value to $1.41 billion. Similarly, its non-GAAP net income and non-GAAP EPS grew 12% from the prior year's period to $1.25 billion and $0.77, respectively.

AMD and NVDA Growth Comparison

AMD's recent strides toward securing a spot in the trillion-dollar club spell trouble for its rival, NVDA. AMD's robust growth trajectory seems poised to challenge and potentially surpass NVDA in the market. This is primarily due to the recent events in the stock market, which have raised eyebrows.

NVDA's stock took a significant hit last week, tumbling into correction territory with a 10% decline from its recent peak. This downturn comes at a crucial juncture, highlighting potential vulnerabilities for the market darling.

Adding to NVDA's woes is the persistent supply constraint plaguing its H100 GPU chips. Despite soaring demand, the company has struggled to meet supply requirements for months, leading to significant challenges in fulfilling orders. The severity of this supply-demand mismatch was underscored by Tesla, Inc. (TSLA) CEO Elon Musk's admission that even TSLA couldn't acquire the chips quickly enough.

Furthermore, the lackluster performance of NVDA's stock from July 2023 to October 2023, as highlighted by Evercore ISI strategist Julian Emanuel, serves as a cautionary tale. This stagnant period failed to generate momentum for NVDA and catalyzed broader market downturns, impacting the S&P 500 index.

In light of AMD's upward trajectory and NVDA's recent setbacks, it's evident that the competitive landscape in the semiconductor industry is undergoing a significant shift, with AMD emerging as a formidable challenger to NVDA's dominance.

Furthermore, in a Texas federal court, NVIDIA was sued for trademark infringement by the financial technology company Modulus Financial Engineering over the chipmaker's Modulus artificial intelligence software.

Modulus Financial asked the U.S. District Court for the Western District of Texas to force NVDA to stop using the Modulus name, which it said would create consumer confusion with its AI-related software.

Bottom Line

Investor interest in AI has reached a fever pitch, driving substantial gains in the stock market throughout 2023 and 2024. With the global AI market valued at $515.31 billion in 2023 and projected to reach $2.74 trillion by 2032, the industry's growth trajectory is undeniable.

The surge in AI is fueled by several factors, including the proliferation of AI applications, increased partnerships, the emergence of small-scale AI platforms, and the evolving needs of businesses to navigate complexities. AMD, recognizing the immense potential, is heavily investing in the sector and forging lucrative partnerships to solidify its position in the AI landscape.

Moreover, with potent AI accelerator designs and leveraging third-party manufacturing solutions, AMD is poised to capture significant market share in the AI space, potentially elevating its status in investor discussions alongside NVDA.

Further, AMD's discounted valuation compared to NVDA presents an attractive investment opportunity, further bolstering its appeal as a solid buy in the market. Regarding forward EV/Sales, AMD is trading at 10.15x, 47.5% lower than NVDA's 19.34x. Also, the stock’s trailing-12-month Price/Sales and Price to Book are 11.62x and 4.72x compared to NVDA's 35.74x and 50.56x, respectively.

Against this backdrop, AMD stands well-positioned to make it into the trillion-dollar club and surpass NVDA with its innovative product launches, strategic investments and partnerships, and market dominance.