Cheaper after stock split, but priceless

The Nvidia AI prodigy (NASDAQ:NVDA) the stock increased colossally by $15 (share-adjusted) when I first posted about it at almost $121 currently. It has overtaken Apple to become the second most valuable company in the world. I also predicted that NVDA could opt for a stock split, and that’s just the case. The stock continues to surprise with new highs (+144% since the start of the year) after the spectacular increase in its profits. Nevertheless, my thesis remains intact: NVDA is attractive in the long term because of its undeniable leadership in AI and its exponential growth potential.

NVDA Reports Skyrocketing Profits Again and Again

On May 22, Nvidia reported another stellar first-quarter result, driven by robust continuous computing and accelerating momentum in generative AI demand. Adjusted earnings of $6.12 per share handily beat the consensus estimate of $5.60 per share. Furthermore, this figure is much higher (+461%) than the first quarter fiscal 2024 (ended April 2023) figure of $1.09 per share.

Impressively, first-quarter revenue jumped 262% year-over-year to $26.04 billion, beating the consensus estimate of $24.59 billion. On top of that, its adjusted gross margin increased 13.8 percentage points to an astonishingly new level of 78.4%, up from 64.6% a year ago.

Alongside the earnings report, the company also announced a 10-for-1 stock split. Although the stock split does not change the company’s valuation or performance, it means that NVDA will now be more available to retail investors, thereby creating short-term momentum in the stock price.

In addition to this, the company increased its quarterly cash flow dividend by 150% to $0.01 per share after the split. Shares of NVDA began trading today on an adjusted basis. It’s important to note that this is Nvidia’s sixth stock split.

Importantly, NVDA’s flagship segment, data center revenue, soared 427% year-over-year to $22.6 billion. The segment accounts for 86% of the company’s total revenue. As expected, revenues declined in China due to U.S. export control restrictions. During the earnings conference call, management said that “activity in China is significantly below historical levels.”

Looking ahead, the second quarter forecast looks promising, with income should hover around $28 billion, more than expected. However, adjusted gross margins are expected to be around 75.5%, compared to 77% forecast for the first quarter three months ago. However, it is still far ahead of chipmakers like Advanced Micro Devices (NASDAQ:AMD) and Intel (NASDAQ:INTC), with gross profit margins of 50.6% and 41.5%, respectively, over the past year.

NVDA continues to innovate and maintain its status as a leader in best-in-class AI

Nvidia continues to innovate in the field of AI, keeping its status quo of leadership intact by innovating new cutting-edge AI products. NVDA’s latest GPUs and CPUs, backed by both their hardware and software capabilities, remain top-of-the-line in the AI ​​industry. As the preferred choice in high-computing data centers around the world, NVDA enjoys superior pricing power.

The scope and…

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