Nvidia soars 14% as analysts praise gaming and guidance led by generative AI
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Nvidia (NASDAQ:NVDA) shares soared more than 14% in early trading on Thursday as the semiconductor giant posted stronger-than-expected fourth-quarter results and guidance, with Wall Street analysts praising the recovery in gaming and its potential in generative artificial intelligence.
Susquehanna analyst Christopher Rolland, who has a positive rating and per-share price target of $265 on Nvidia (NVDA), noted that the results from gaming more than offset any concerns about data center, while adding that all four segments - gaming, professional visualization, automotive and embedded and data center - should see future growth. 
Looking ahead, Nvidia (NVDA) said it expects first-quarter sales to $6.5B, plus or minus 2%. Analysts expect the company to report $6.35B in sales.
Nvidia (NVDA) added that it expects adjusted operating expenses to be roughly $1.78B during the period and adjusted gross margins to be 66.5% during the period, plus or minus 50 basis points.
Rolland also noted that the company's gross margins were intact and operating expenses were guided to be around flat over the next few quarters.
"In short, this update was better than feared, perhaps indicating the worst for NVIDIAâs business is past," Rolland wrote in a note to clients.
AMD (AMD) and Marvell Technology (MRVL), which both compete with Nvidia (NVDA), gained more than 4% and 3% respectively on back of the results. 
Goldman Sachs analyst Toshiya Hari upgraded Nvidia (NVDA) to buy after the results, citing the fact the Jensen Huang-led company is taking wallet share in the data center and gaming has normalized.
"Looking ahead, ... we believe the combination of positive estimate revisions and a potential expansion in the stockâs multiple - consistent with historical recovery phases - will drive continued outperformance in the stock," Hari wrote in a note to clients.
KeyBanc Capital Markets analyst John Vinh, who has an outperform rating and per-share price target of $280, noted the opportunities the company sees in generative AI, particularly around ChatGPT, which is widely believed to use Nvidia's (NVDA) GPUs to help train its large language models. 
"Particularly, the [year-over-year] growth for data center is expected to accelerate throughout [fiscal 2024], driven by Hopper ramps and Generative AI demand," Vinh wrote in a note to clients.
Vinh tweaked estimates as a result of the guidance and added that investors should continue to own the stock "for the secular growth opportunity in ML/AI and new product cycles."
Morgan Stanley analyst Joseph Moore, who has an equal-weight rating and per-share price target of $255 on Nvidia (NVDA), said he was concerned about the short-term weakness in the data center, but GPUs are still an area of "relative strength" in the cloud. 
"We have been waiting for a pullback to make a more timely call given the surge in the stock, but with weaker numbers out of the way, we would concede aren't sure that pullback is going to come; we would maintain a market weight position in the stock and will continue to look for opportunity," Moore wrote.
On Tuesday, Microsoft announced that it had signed a deal with Nvidia (NVDA) to bring its Xbox PC games to Nvidia's GeForce Now streaming service.