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Why NVIDIA Corporation's Stock Spiked 81% in 2017

By Chris Neiger - Jan 10, 2018 at 10:18AM

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A 38% share price gain in May got the ball rolling.

What happened

Graphics processor maker NVIDIA Corporation (NVDA 5.38%) saw its share price jump 81.3% in 2017, according to data provided by S&P Global Market Intelligence, as the company beat analysts consensus earnings estimates throughout the year.

So what

NVIDIA's share price was relatively flat for the first few months of the year, until the company reported its fiscal first-quarter 2018 results in May. The chipmaker's top line jumped by 48% and earnings skyrocketed 144% year over year -- both which made investors very happy -- and the company's shareholders subsequently pushed up NVIDIA's shares 15% the day of the earning report release and 38% in all of May.

A stock chart with percentages and line graph.

Image source: Getty Images.

The company's shares continued to climb for months after that and gained more than 20% in the three months leading up to the company's fiscal third-quarter 2017 earnings report in November. NVIDIA grew its sales by 32% in the third quarter, to $2.64 billion, and earnings spiked by 60%, to, $1.33 per share -- analysts had been expecting just $0.92 in earnings in the quarter.

NVIDIA investors were also optimistic about the company's longterm prospects in artificial intelligence (AI), data centers, and driverless cars. The company makes about 59% of its revenue from sales of its graphics processors for the gaming market, but management has said that segments like AI could be a nearly $40 billion opportunity for NVIDIA in the coming years -- and investors are banking on those prospects.

Now what

NVIDIA's management is forecasting sales to be around $2.65 billion in the fourth quarter (plus or minus 2%). That would be about a 22% increase in the company's top line year over year and would likely help keep investor sentiment high for NVIDIA's shares.

Investors have already pushed up the company's stock price by 13% since the beginning of this year and optimism from NVIDIA's management -- as well as continued earnings and revenue growth -- could extend the trend as we head further into 2018.

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