- Nvidia shares surge 8% on Thursday as results are strong.
- AMD stock joins the rally as it makes all-time highs.
- Nvidia stock forecasts from Wall Street could see this rally continue.
Semiconductor stocks are once again proving to be one of the hottest sectors right now. The sector has been booming in 2021 as global shortages hit manufacturers and keep demand surging. Along with the electric vehicle sector, semis are the hottest gig in town right now. The EV sector is booming on the back of increased adoption of EVs. This is helpful to semi stocks as electric vehicles use a lot more semiconductor chips than traditional fossil fueled vehicles. The Philadelphia Semiconductor Index is the benchmark for the sector and we can see from the chart below the index is up over 40% year to date. This is against 25% year to date for the S&P 500 and 28% for the Nasdaq. Semiconductors is clearly the place to be to outperform. The Philadephia Semi Index includes all the big names in the sector: AMD, Nvidia, Intel, Texas Instruments, Broadcom,Qualcomm, etc.
NVDA 1-day chart
Nvidia (NVDA) stock news
Earnings are the driver here, so let us dive in to this week's release. Earnings came in ahead of estimates. Earnings per share were $1.17 versus $1.10 estimated. Revenue was $7.1 billion ahead of the $6.83 billion estimate. Nvidia also forecast Q4 revenue to increase to $7.4 billion at the mid-range. This compares to what analysts had been forecasting of $6.86 billion. Immediately, those analysts rushed to upgrade their Nvidia stock forecasts. Practically every major Wall Street firm upped their NVDA stock forecast price targets, so we will not go through them all. There was strong growth signs with data centre revenue up over 55% YoY, while the pivot to the omniverse (metaverse) can provide an additional growth factor. Gaming revenue grew to $3.22 billion, up 42% YoY.
We should note that overall revenue growth has slowed slightly in the last quarter from 15% to 10% QoQ. With forecasts for Q4 at $7.4 billion, this is a further growth slowdown but nonetheless ahead of where the market was expecting. Yearly revenue growth for Q3 remains strong at just over 50%. If Nvidia's forecast turns out to be true for Q4, then that will imply Q4 yearly revenue growth of 40%, a further slowdown in the growth rate.
Nvidia (NVDA) stock forecast
Nvidia's forecasts for strong continued revenue growth have given the stock the initial surge to push to fresh record highs on Thursday. While we have demonstrated above that revenue growth is slowing, it still remains exceptionally strong and in such a strong environment more gains should be expected. Our only area of concern is the current double top on the Nvidia chart below. Thursday's move barely made a record high, so we would like to see this built on and eliminate a bearish double top. Nvidia is up 141% for 2021 – quite the stellar performance. Continuing this may be tricky.
Breaking $292 leads to a massive volume gap down to $230. That would be the outcome and likely target of the double top, so just keep those levels in mind.
NVDA 1-day chart
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