Following NVIDIA’s impressive earnings beat, where it surpassed the first quarter consensus estimates with a near USD 26 billion revenue, the AI chipmaker’s outlook remains robust, underpinned by strong data center, automotive, and robotics performance. This success also heralds a broader, sustained AI rally, notwithstanding some reservations reflected in Thursday’s muted trading across Asia’s AI supply chain.
NVIDIA not only exceeded expectations but also increased its revenue guidance for the next quarter to around USD 28 billion, significantly above consensus projections. This positive revision, coupled with the announcement of a 10-for-one stock split, has further fueled investor enthusiasm.
Despite the overarching optimism, the global AI market continues to grapple with demand and valuation concerns. However, the ongoing robust capital expenditure in data centers, a sentiment echoed by Microsoft’s CTO, Kevin Scott, suggests a continuing investment in AI capabilities without nearing the point of diminishing returns. This scenario promises significant growth in AI computing, which is expected to dominate capital expenditure in the tech sector.
Moreover, NVIDIA’s transition to its next-gen Blackwell chip, set to begin shipping in the second quarter, is likely to alleviate concerns about a potential slowdown in the AI supply chain. This should help maintain the momentum in the semiconductor sector, where we anticipate earnings growth of 50% this year and 25% in 2025, with potential for upward revisions.
Looking beyond cloud platforms, NVIDIA’s CEO Jensen Huang highlighted AI’s expansion into diverse sectors such as sovereign entities, enterprises, automotive industries, and healthcare. This broadening scope suggests that AI’s influence will permeate more deeply into consumer technology, potentially rejuvenating PC and smartphone markets with new AI-enabled devices launching this year.
The robust earnings in the tech sector underscore a stronger performance relative to other market segments, supporting the reasonable valuations in global tech, currently at 24x price-to-2025 earnings. The expected continuation of earnings growth, driven by ongoing AI developments and capital expenditures, reinforces our positive stance on the AI trend and our preference for major tech firms due to their strategic market positions.
As we look ahead, the AI landscape is poised for further excitement with upcoming events such as Computex, Apple’s WWDC, and an Amazon AI event scheduled for early June. These gatherings could introduce new catalysts for the AI sector, emphasizing the vibrancy and dynamism of this technological frontier.
Investors are advised to maintain a diversified tech portfolio, with a keen focus on Asian AI beneficiaries and the memory segment, which continues to see extended backorders for AI chips. This strategic approach should harness the ongoing advancements and capitalize on the lucrative opportunities within the AI and broader tech landscape.