Nvidia Stock Surges as Earnings Shut Down AI Bubble Talk. How High It Could Go.

Nvidia CEO Jensen Huang has built the company into the favored provider of artificial-intelligence chips. (Photo by I-HWA CHENG/AFP via Getty Images)

Key Points

• Nvidia reported adjusted earnings per share of $1.30 and revenue of $57 billion, exceeding Wall Street estimates.
• The company forecasts a revenue midpoint of $65 billion for the current quarter, implying 65% growth.
• CouThe Commerce Department approved the sale of up to 70,000 advanced AI chips to companies in the U.A.E. and Saudi Arabia.

Nvidia stock was rising strongly early Thursday. The chip maker’s earnings look to have silenced concerns of a bubble in artificial-intelligence investment.

The stakes were high going into Wednesday’s post-market report amid a recent selloff in AI stocks. In the run up to the release, Japan’s SoftBank Group and billionaire Peter Thiel’s fund both disclosed that they had sold their stakes in the chip maker in recent months, while famed short seller Michael Burry took aim at the AI sector in general, alleging companies were overstating the useful life of their chips.

“There’s been a lot of talk about an AI bubble. From our vantage point, we see something very different,” Nvidia CEO Jensen Huang told analysts in an earnings call.

Sales of the company’s current-generation Blackwell hardware are “off the charts,” Huang said in a statement. Additionally, Nvidia CFO Colette Kress told analysts that chips sold six years ago are still being fully utilized by customers.

“Nvidia did a good job hinting at how depreciation schedules at their big customers are accurate as software updates prove to extend lives of older chips,” wrote Melius Research analyst Ben Reitzes in a research note. “Therefore, the read across is great for the sector since it points to very strong spending from hyperscalers and sovereigns outside of China through 2026.”

Reitzes raised his target price on the stock to $320 from $300, keeping a Buy rating.

Nvidia shares were up 4.9% at $195.62 in premarket trading. The new average price target on Wall Street following the results is about $248 according to FactSet. That implies a 33% upside to Wednesday’s closing price.

Nvidia reported adjusted earnings per share of $1.30, compared with Wall Street’s consensus estimate of $1.26, according to FactSet. Revenue for the fiscal third quarter was $57 billion, up 62% from the prior year and ahead of expectations for $54.9 billion.

For the current quarter, Nvidia forecast a revenue range with a midpoint of $65 billion, above the consensus of $62.2 billion. Notably that implies an acceleration of growth to 65% and doesn’t assume any revenue coming from China. Nvidia has faced increasing concerns that its sheer size means revenue growth will inevitably slow down, especially with Beijing pressuring local companies to stop buying its processors.

D.A. Davidson analyst Gil Luria reiterated a Buy rating and $250 target price on the stock, noting Nvidia management expect to be capable of delivering more than the $500 billion in cumulative revenue from Blackwell and next-generation Rubin chips it had previously said it could generate from early 2025 through 2026.

“The market wasn’t surprised by the beat and raise—a cadence that investors have become accustomed to over the past few years. But the magnitude of the beat is what’s going to keep the AI hype front and center for the market, giving risk assets more of an all clear sign into year end,” said David Wagner, head of equity at Aptus Capital Advisors.

Separately, Nvidia got some more good news as the Commerce Department approved the sale of up to 70,000 advanced artificial-intelligence chips to two companies based in the United Arab Emirates and Saudi Arabia.

The deal would allow U.S. companies to sell up to 35,000 of Nvidia’s GB300 servers or their equivalents to both G42, a state-run AI company based in Abu Dhabi, and Humain, a Saudi government-backed AI venture, The Wall Street Journal reported, citing government officials. While it’s a relatively small allocation, the approval should point the way to bigger sales of chips to the Middle East in future for Nvidia and its peers.

Among other chip makers, Advanced Micro Devices was up 4.9% and Broadcom was rising 3.1% in premarket trading.

Write to Adam Clark at adam.clark@barrons.com