NVIDIA (NASDAQ: NVDA) started off tremendously in the calendar year 2021, with the shares of the graphics card specialist rising by more than 14% in the first few weeks of the new year.
The company’s impressive performance on the stock market could gain extra momentum next week when it announces the results for the fiscal fourth quarter of 2021, which ended on 31 January 2021. Let’s see why.
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Wall Street analysts expect NVIDIA to earn $ 2.80 per share in revenue of $ 4.82 billion. The numbers are almost in line with the company’s earnings guidance (released in November) of $ 4.80 billion and an income estimate of $ 2.79 per share.
Investors should remember that analysts originally expected NVIDIA to earn $ 2.54 per share in adjusted earnings on $ 4.42 billion in revenue. The chipmaker raised the bar much higher when it released its third-quarter fiscal report in mid-November.
The centerpiece of the NVIDIA guidelines indicates that fiscal revenue will increase by 54% year-on-year in the fourth quarter, while earnings will increase by 48%. But do not be surprised to see that NVIDIA beats its own expectations, thanks to the overwhelming demand for its graphics cards. The RTX 30 series of graphics cards that NVIDIA released a few months ago are hard to find thanks to their impressive pricing and major improvements over the previous generation of cards.
NVIDIA chief financial officer Colette Kress recently pointed out that the demand for its gaming GPUs (graphics processors) ‘is not off the cards’. According to Kress, supply levels are likely to remain sluggish through the company’s fiscal first quarter ending in April. A lack of components also hurts supply, but NVIDIA is reportedly in a better position at the front compared to competitor Advanced micro-devices (AMD).
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In addition, NVIDIA is trying to alleviate the shortage of graphics card by increasing the production of older generation chips. Quote an NVIDIA driver, PCWorld reports that the company is facing “extremely high demand”, which has led to increased production of two popular cards – the RTX 2060 and the GTX 1050 Ti.
Consumers do not have to break the bank to buy these cards, because the RTX 2060 has a price of $ 350, while the 1050 Ti is much cheaper at $ 140. These cards are equipped with GDDR5 memory, which enables NVIDIA set to bypass the GDDR6 memory shortage used in the RTX 30 cards.
As such, NVIDIA may have taken away more market share from AMD over the past quarter. The rise of older but popular GPUs could help give NVIDIA more pressure on its arch-enemy this quarter, and it could lead to better-than-expected guidance.
The data center catalyst
The data center business is expected to deliver another instant performance, thanks to strong demand from cloud service providers.
NVIDIA has increased the production of its data center servers and recently shipped its A100 GPUs to server partners. The A100 appears to be an extremely popular data center GPU, with a number of large cloud companies queuing up to buy it due to the huge performance increase it delivers above its predecessor.
It is not surprising that the demand for A100 GPUs last year was allegedly greater than the supply. An increase in production bodes well for NVIDIA’s data center revenue, which accounted for 40% of its fiscal third quarter revenue and recorded a large year-on-year jump of 162%.
NVIDIA is in all respects under favorable conditions in the end market published in its quarterly report, which will be launched on Wednesday 24 February. The huge demand for graphics cards used in video games and data centers, coupled with NVIDIA’s dominating market share, should help deliver a beat-and-raise quarter and fuel the rise of this hot growth stock.