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Nvidia Surges 9%, Tops $1,000 After Stellar Earnings, Stock Split, and Dividend Hike

Nvidia (NVDA) saw its stock rise 9.3% on Thursday, closing above $1,000 for the first time. 

The surge followed the company's release of first-quarter earnings that far surpassed analysts' expectations, along with announcements of a 10-for-1 stock split and a dividend increase.

Nvidia AI chip maker, best stocks to buy, learn a trade

Blowout Earnings

Nvidia's first-quarter results, unveiled on Wednesday, reported adjusted earnings per share (EPS) of $6.12 on revenues of $26 billion. These figures represented year-over-year increases of 461% and 262%, respectively. Wall Street analysts had anticipated an EPS of $5.65 and revenue of $24.69 billion.

For comparison, Nvidia's adjusted EPS was $1.09 on revenue of $7.19 billion in the same quarter last year. This performance underscores the company's remarkable growth, particularly in the AI sector.

Stock Split and Dividend Hike
In addition to robust earnings, Nvidia announced a 10-for-1 stock split, which will take effect on June 7. This move aligns with recent trends among tech giants, aiming to make shares more accessible to a broader range of investors. The company also increased its quarterly dividend to $0.10 per share, up from $0.04.

The stock split, which gives shareholders 10 shares for every one share they own, often boosts investor enthusiasm. It can also have a psychological impact, making shares appear more affordable, and benefits options traders by lowering the price per share.

Sustained Demand for AI
Nvidia's dominance in the AI chip market continues to drive its financial success. The company's data center revenue, a critical segment fueled by the demand for AI, surged 427% year over year to $22.6 billion, making up 86% of Nvidia's total quarterly revenue.

CEO Jensen Huang highlighted the strong and accelerating demand for AI training and inference on Nvidia's Hopper platform. Despite the upcoming release of the more advanced Blackwell system, customers remain eager to deploy Nvidia's current AI solutions. Huang noted, "People want to deploy these data centers right now... the demand is just so strong."

This sentiment was echoed by CFO Colette Kress, who mentioned that large cloud providers like Microsoft (MSFT), Google (GOOG), and Amazon (AMZN) accounted for around 45% of Nvidia's data center revenue.

Future Outlook
Looking ahead, Nvidia expects revenue for the second quarter to reach $28 billion, plus or minus 2%, exceeding analysts' expectations of $26.6 billion. The company anticipates non-GAAP gross margins to settle around 75.5%, slightly lower than the 78.9% reported for the first quarter but consistent with management's previous guidance.

Nvidia's aggressive forecast reflects its confidence in sustained AI demand. The company plans to begin generating revenue from its Blackwell platform sooner than expected, with shipments anticipated by early 2025.

Market Impact and Analyst Reactions
Nvidia's impressive results and forward-looking statements have bolstered investor confidence. JPMorgan analysts, led by Harlan Sur, raised their price target on Nvidia stock from $850 to $1,150, reiterating an Overweight rating. They emphasized Nvidia's lead over competitors, noting, "Nvidia continues to maintain a 1-2 step lead ahead of competitors."

However, there are risks. The significant capital being poured into AI by tech firms could lead to a supply glut if demand does not materialize as quickly as expected. Nvidia must also navigate the competitive pressures from major cloud providers developing their own AI chips.

Nvidia's latest earnings report and strategic announcements have reaffirmed its position as a leader in the AI chip market. With a market cap exceeding $2.5 trillion, Nvidia continues to set new benchmarks in the industry. The stock split and dividend hike are likely to attract more investors, further solidifying its market presence. Despite potential risks, Nvidia's robust growth and market-leading technology make it a compelling investment in the ever-evolving tech landscape.

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