Following the announcement of Nvidia’s results, Garry White, Chief Investment Commentator at Charles Stanley, has shared his analysis.
“It was another upbeat quarter from artificial intelligence (AI) chip group Nvidia, albeit at a slightly slower pace than most of the quarters in the past two years. But quarterly year-on-year revenue growth of 78% remains stunning – and guidance for the first quarter came in slightly ahead of expectations too.
“The emergence of China’s DeepSeek a month ago is not as negative as some think. The competition will drive innovation, just like during the Cold War when rivary between nations it propelled man to the Moon. Such ‘disruptive innovation’ often creates a new product or service that’s more accessible, affordable and simpler than existing options. This is good for future consumers. It may also ensure that the other leaders in the sector – such as Microsoft, Amazon and Alphabet – will deploy investment capital more prudently, benefitting shareholders over the long term.
“Of course, there are speedbumps ahead. So far, investors have been relatively unconcerned about a loss of momentum in margins as this is normal for a company investing in bringing new products to market. Nevertheless, management needs to ensure shareholders are reassured on this front.
“The Trump administration’s trade actions remain a significant threat. The banning of sales of certain chips to China is a significant sales risk and future policy is unclear as it is still being debated and shaped in private. However, Nvidia investors can now be reassured that the wider AI growth story remains intact. Big Tech companies such as Amazon, Google, Meta and Microsoft will continue to spend billions of dollars building out AI data centres, driven by Nvidia chips. The company’s chips remain demonstrably superior and – although anecdotal – it is claimed its new, powerful product line of Blackwell chips is showing “amazing” growth.
“This was a ‘Goldilocks’ quarter. It was neither too hot nor too cold – and the share price reaction should be relatively muted too, without a large spike or fall in its market valuation. All this together adds up to a prop for Nvidia’s valuation, with worries some investors had ahead of this earnings report likely soothed too.”
