Shares of Nvidia (NVDA -1.54%) charged sharply higher Thursday, jumping as much as 15.5%. As of 10:10 a.m. ET, the stock was still up 14.6%. The catalyst that sent the semiconductor giant higher was earnings results that far outpaced expectations while forecasting (another) record-breaking quarter.
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It's all about the AI boom
For its fiscal 2024 fourth quarter (ended Jan. 28), Nvidia generated revenue of $22.1 billion, soaring 265% year over year and 22% sequentially. This resulted in adjusted earnings per share (EPS) of $5.16, which surged 486% and 28% sequentially. This marks the third consecutive quarter of triple-digit growth from the company.
For context, analysts' consensus estimates were calling for revenue of $20.62 billion and adjusted EPS of $4.63, so Nvidia blew past already lofty expectations.
Driving the blockbuster results was Nvidia's data center segment -- which includes the processors used to power artificial intelligence (AI) applications. Nvidia's data center revenue climbed 409% year over year to a record $18.4 billion while increasing 27% since last quarter. The recovery of the gaming segment also gained ground, with revenue up 56% year over year.
CFO Colette Kress noted, "In the fourth quarter, large cloud providers represented more than half of our Data Center revenue," which suggests the build-out to support the accelerating adoption of generative AI is ongoing.
It ain't over yet
Perhaps the biggest contributor to the stock price this morning came from Nvidia's blockbuster forecast. For the fiscal 2025 first quarter, management is calling for revenue of $24 billion, which would represent year-over-year growth of 234%. Not only would that be Nvidia's best-ever quarter by far, but it would also beat Wall Street's consensus forecast by 17%.
Bears will argue that Nvidia's valuation has gotten ahead of itself, but that view may be myopic. While the stock is currently selling for 65 times earnings and 32 times sales, those metrics fail to take into account the company's extraordinary growth. The more appropriate price/earnings-to-growth (PEG) ratio -- which factors in its triple-digit growth -- reveals a valuation of 0.1 when the standard for an undervalued stock is less than 1.
Make no mistake: Nvidia stock is a buy.
