Whatās Going On Here?After surviving a crypto mining slump in 2019, boy did this canary sing: US chipmaker Nvidia returned to growth in the last three months of the year, and last Friday reported better-than-expected earnings. What Does This Mean?Itās true: Nvidiaās sales were on the decline for most of 2019. But investors had cause to be optimistic after rival chipmaker Intel reported better-than-expected earnings last month, and provided a powered-up outlook for 2020. And that optimism was well-placed: Nvidiaās fourth-quarter revenue grew 41%, blowing investorsā expectations out of the water.
Nvidia saw record sales at its data center division, which sells chips to the likes of Amazon, Microsoft, and Google. After a slowdown last year, those tech giants are spending on data centers again as they try to meet increasing demand for cloud services like artificial intelligence. And theyāre turning to Nvidiaās graphics chips ā which are well-suited to handling AI calculations ā to help them do just that. Why Should I Care?For markets: Youāre too good to us.
Shares in Nvidia rose as much as 8% on Friday and hit an all-time high, adding fuel to a rally thatās already seen the chipmakerās shares more than double from their low point last year (tweet this). Investors clearly dug Nvidiaās results, but that wasnāt all they liked: its first-quarter sales forecasts were better than expected, and the chipmaker also revealed itāll resume buying back its shares after it completes a major acquisition in early 2020.
Zooming out: Chip, chip, chooray!
Chip demand is largely driven by economic growth (theyāre used across almost every industry, after all). And that, in turn, is driven largely by consumer spending, which accounts for more than two-thirds of the US economy. More good signs for chipmakers, then: data out last Friday showed retail sales grew 0.3% in January from a month earlier ā an improvement from Decemberās downwardly revised 0.2%. | 