Stocks tied to the artificial intelligence megatrend rose on Thursday after Nvidia provided a reassuring outlook for AI data center demand.
Nvidia late Wednesday reported better-than-feared fiscal first-quarter results and said demand remains strong for AI computers. The chipmaker beat Wall Street's sales and earnings targets for the quarter ended April 27, even with the loss of China business from U.S. trade restrictions.
Nvidia's data center revenue surged 73% from the year-ago period to $39.1 billion in fiscal Q1.
"Every nation now sees AI as core to the next industrial revolution, a new industry that produces intelligence and essential infrastructure for every economy," Nvidia Chief Executive Jensen Huang said on a conference call with analysts. "This is the start of a powerful new wave of growth. Grace Blackwell is in full production. We're off to the races."
On the stock market today, Nvidia stock climbed 3.3% to close at 139.19. With the advance, Nvidia broke out of a cup-with-handle base at a buy point of 137.40, based on IBD analysis. In intraday trading, Nvidia stock surged as much as 6.4% to 143.49.
At least 13 Wall Street analysts raised their price targets on Nvidia stock after the company's earnings report.
Other AI-exposed stocks rising on Thursday included Advanced Micro Devices, Astera Labs, Coherent, Credo Technology and Taiwan Semiconductor Manufacturing. However, early gains faded as the trading session progressed.
Nvidia Report 'Music To Ears Of Tech Bulls'
"Overall this was a robust quarter (for Nvidia) with very positive commentary around demand despite the China issue," Wedbush Securities analyst Daniel Ives said in a client note. "That should be music to the ears of tech bulls."
He added, "We continue to believe the path for Nvidia to a $4 trillion market cap and ultimately $5 trillion market cap over the coming years is on the horizon." At Thursday's close, Nvidia had a market cap of nearly $3.4 trillion.
Nvidia's report put to rest concerns about customers pausing purchases of AI chips to "digest" what they've already bought, Morgan Stanley analyst Joseph Moore said in a client note. Excluding China, sales are accelerating, he said.
"Everything should get better from here," Moore said. He reiterated his overweight rating on Nvidia stock and upped his price target to 170 from 160.
Sovereign AI projects in countries like Saudi Arabia are filling the gap caused by lost China sales, BofA Securities analyst Vivek Arya said in a client note. Those deals also are diversifying Nvidia's customer base beyond U.S. hyperscale cloud service providers, he said. Arya rates Nvidia stock as buy and increased his price target to 180 from 160.
Nvidia's commentary also dispelled worries that the company was running into production challenges slowing shipments of its latest Blackwell series processors, analysts said.
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