What happened

Shares of Nvidia (NVDA -1.14%) charged sharply higher Thursday, jumping as much as 26.4%. As of 10:30 a.m. ET, the stock was still up 25.2%.

The catalyst that sent the semiconductor giant higher was earnings results that were far better than expected and a forecast for a record-breaking quarter on the horizon.

So what

For its fiscal 2024 first quarter (ended April 30), Nvidia generated revenue of $7.2 billion, down 13% year over year. This resulted in adjusted earnings per share (EPS) of $1.09, which declined 20%. 

While this might not seem like cause for celebration, the numbers soared past even Wall Street's most bullish projections. Analysts' consensus estimates were calling for revenue of $6.5 billion and EPS of $0.92, so Nvidia left those expectations in the dust.

The results were driven by surging demand for the processors that power artificial intelligence (AI) applications. Nvidia's data center revenue (which includes AI chips), climbed 14% year over year to a new record, while increasing 18% since last quarter. The recovery of the gaming segment also gained ground and while revenue was down 38% year over year, it was up 22% sequentially.

Now what

Perhaps the biggest boost to the stock price this morning came from Nvidia's blockbuster forecast. For the fiscal second quarter, management is calling for revenue of $11 billion, which would represent year-over-year growth of 33% and Nvidia's best quarter ever. Not only would the results surpass Nvidia's best-ever quarter by 33%, but they would also beat Wall Street's consensus forecast for the quarter by 51%. 

Eagle-eyed investors will note that Nvidia's already lofty valuation has gone through the roof with this morning's stock price move. The stock is currently selling for 36 times trailing-12-month sales, and an only slightly more palatable 25 times forward sales, when a reasonable price-to-sales ratio is between 1 and 2.

There's no doubt the stock is currently pricey, but Nvidia is chasing a vast opportunity, and AI is just getting started. That said, investors might want to look at better value points at which to buy or hold -- or both -- for at least five years.