Please ensure Javascript is enabled for purposes of website accessibility

Why NVIDIA Stock Jumped 12% in July

By Beth McKenna – Aug 3, 2020 at 11:37PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the artificial intelligence leader are having a super 2020.

What happened

NVIDIA (NVDA -1.51%) stock popped 11.8% in July, according to data from S&P Global Market Intelligence. That's a bit better than twice the market's performance, as the S&P 500 returned 5.6% last month.

Shares of the artificial intelligence (AI) leader have been on fire this year. They've returned 87.5% through Monday, Aug. 3, while the S&P 500 has returned 3.1% over the period. 

Silhouette of a person's head in profile overlaid on a colorful background of a circuit board and computer code.

Image source: Getty Images.

So what

NVIDIA wasn't the subject of any market-moving news in July. We can attribute its stock's strong July performance simply to the powerful momentum it has had all year.

This momentum stems largely from robust financial results that have beaten Wall Street's estimates, as well as management's upbeat outlooks. Investors are also enthused about the acquisition of Mellanox Technologies, which closed on the first day of NVIDIA's fiscal second quarter. Mellanox makes high-performance networking products and strengthens NVIDIA's AI-driven data center platform. 

As to the "robust financial results," in the fiscal first quarter, NVIDIA's revenue surged 39% year over year to $3.08 billion. Growth was driven by its data center business, which posted sales growth of 80% year over year. Earnings per share (EPS) shot up 130% year over year to $1.47, while adjusted EPS soared 105% to $1.80. Wall Street was expecting adjusted EPS of $1.68 on revenue of $2.98 billion, so NVIDIA beat on both counts. 

NVDA Total Return Price Chart

Data by YCharts.

Now what

Investors don't have long to wait for material news. The company recently announced that it will release its fiscal second-quarter results on Wednesday, Aug. 19, after the market close.

For the quarter, management guided for revenue of $3.65 billion, representing growth of 41.5% year over year. According to my calculations from the inputs management provided, it also expects adjusted EPS of $1.94. This represents growth of 56.5% over the year-ago period. 

This outlook includes the contribution from Mellanox, which is expected to contribute a "low-teens percentage" of NVIDIA's total quarterly revenue and be accretive to earnings. 

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NVIDIA. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Nvidia Stock Quote
$162.70 (-1.51%) $-2.49

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.