Event Overview:
The stock price of AMD (NASDAQ: AMD), a leading producer of computer processors, surged by 7.53% this morning in response to the exceptional quarterly results of competitor, Nvidia. During the quarter, Nvidia’s revenue surpassed expectations by 10.3%, driven by their record-breaking data center revenue of $4.28 billion. More so, the company’s gross and operating margins exceeded expectations, and their earnings per share beat estimates by 18.8%. Inventory levels also marked a reduction. In addition to these impressive quarterly results, Nvidia’s revenue and operating profit guidance for the next quarter surpassed Consensus estimates by over 50%. Moreover, Nvidia Founder and CEO, Jensen Huang, emphasized the ongoing transformations in the computer industry, especially advancements in accelerated computing and generative AI, indicating that Nvidia is ready to capitalize on the opportunities presented by the anticipated trillion-dollar shift in global data center infrastructure.
Market Implications:
AMD’s shares have been very volatile in the past year, with 32 moves greater than 5%. Therefore, the market perceives today’s move as significant but not a major change to investors’ overall opinion of the company. The recent big move was 23 days ago when the stock price dropped by 5.91% following the company’s Q1 earnings report. Although Q1 EPS and revenue beat analysts’ estimates, free cash flow did not meet expectations, and inventory levels rose. Additionally, revenue guidance for the next quarter was below Consensus estimates, and management highlighted that they were dealing with a “mixed demand environment,” resulting in an expected revenue growth of “flattish” during the rest of H1. Consequently, it was a weaker quarter for the company, and Vivek Arya, Bank of America’s analyst, downgraded their rating of AMD’s stock from Buy to Neutral (Hold).
Since the beginning of this year, AMD’s stock price has increased by 87.1%. Investors who bought $1,000 worth of the company’s shares five years ago would have an investment worth $8,840 by now.
Interested in buying AMD shares? Access our comprehensive analysis of the earnings results for free here.
