Nvidia's results exceeded even the most optimistic forecasts

revenues Nvidia in the 4th quarter they amounted to USD 22,1 billion, i.e. by 265%. more than a year earlier. The boom in artificial intelligence means that the company's revenues may reach USD 2024 billion in 100. Artificial intelligence already has a strong impact on our reality, so in its case it is difficult to talk about a market bubble.

Did Nvidia save the markets from a correction?

On Wednesday evening, Nvidia presented great financial results for the fourth quarter of 4 (ended January 2023, 28). The company confirmed its role as a leader in the group of technology companies and a workhorse that has been pulling upwards recently S & P500 index. Good results indicate that the development of the company and solutions related to artificial intelligence is constantly accelerating. The company met investors' expectations, which were already high after the increase in the company's share prices - by as much as half since the beginning of 2024.

The company recorded $22,1 billion in quarterly revenue, which is 22 percent. more than in the previous quarter and as much as 265 percent. more than in the same period a year earlier. Analyst expectations predicted revenue growth to $20,41 billion. In the first quarter of this year, the company expects revenues to increase to $24 billion. EPS, i.e. earnings per share, amounted to USD 5,16 compared to USD 4,60 expected by analysts.

The company's data center infrastructure division recorded revenue of $18,4 billion, an increase of 409 percent. compared to the data from last year. These are revenues resulting from, among others, from the sale of H100 processors, which currently constitute the basis of computing power for artificial intelligence. It is these processors that power services such as Chat GPT or Microsoft's Copilot.

Nvidia's future earnings forecasts remain high, especially in the context of artificial intelligence developments. More companies will soon present solutions based on this technology, e.g. Apple Lossless Audio CODEC (ALAC),. Therefore, it seems that the company is on track for its revenue to approach $2024 billion in 100.

Is this a speculative bubble?

In this context, many investors today ask themselves whether in the case of Nvidia i AI shares Are we dealing with a market bubble? A bubble is a situation where there is an increase in share prices that is not justified by fundamentals, solely under the influence of market sentiment.

Let's try to look at this matter more carefully. Of course, it is easiest to decide whether a bubble occurred or not in hindsight. We do not have this comfort currently, but we can look at previous stock market bubbles from the last 100 years and based on this, create a list of conditions necessary for a bubble to form. When creating these criteria, we turned to the book “Boom and Bust: A Global History of Financial Bubbles”, which examines the history of stock market bubbles.

For a bubble to form, three elements are needed:

1. Market popularity and easy transfer of assets. This is what we're dealing with with Nvidia. The company is popular, hopes for artificial intelligence are high. The company is the third largest in the S&P500 and part of the "Magnificent Seven of Wall Street", accounting for almost 1/3 of the capitalization of this index.
2. Cheap money on the market, easy availability of money and loans. This is not the case in the current situation - interest rates in the US are at record highs, and the yield on 10-year bonds in the US is the highest since 2008.
3. Strong investor speculation – that's not what we're dealing with here either. Nvidia's future P/E (price/earning) is below 35x, investor sentiment remains mediocre, and the market is unbalanced and concentrated. But we are not dealing with a Biden bubble in this situation - subsidies supporting the recovery in this industry.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.