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Nvidia stock bounces back after 4Q earnings beat on strong server sales

ROBO Global research director Jeremie Capron said Nvidia had a ‘significant’ tech advantage over its competitors, a multi-year lead reflected in its market leadership in GPUs especially when it comes to artificial intelligence applications

A Nividia chip
Nvidia CFO Colette Kress said on the earnings conference call that the company expects inventory to return to normal levels by the end of the first quarter

Nvidia Corp (NASDAQ:NVDA) continued to rally Friday in premarket trade after posting fourth-quarter earnings that beat analysts' forecast, thanks to strong server sales.

The chipmaker posted earnings per share of $0.80 on revenue of $2.21 billion. The average forecast was for $0.75 on revenue of $2.20 billion.

Shares in Nvidia rose nearly 5.7% to 163.38.

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The chipmaker predicted that revenue would stay flat this year — better than what analysts were forecasting.

For the year, Nvidia said it expects “flat to down slightly” revenue, compared with the $11.72 billion it reported for fiscal 2019. This allayed the market’s worst fears as analysts polled by Refinitiv were expecting a decline of 7% from 2019.

Nvidia CFO Colette Kress told analysts on the earnings conference call that the company expects inventory to return to normal levels by the end of the first quarter.

“We believe that normalized quarterly gaming business revenue run rate is approximately $1.4 billion,” Kress said. “As we look past Q1 we expect the channel inventory correction to be behind us and our business to have bottomed.”

Nvidia is a component in the ROBO Global Robotics & Automation Index, the world’s first benchmark index to track companies that focus on robotics, automation and artificial intelligence.

“Nvidia continues to maintain a significant technological advantage over its competitors, a multi-year lead that is reflected in its market leadership in GPUs especially when it comes to AI applications,” said Jeremie Capron, director of research at ROBO Global. “While the decline in the fourth may appear scary to commentators focused on near-term trends, it is just a speed bump in the context of phenomenal growth in recent years.”

ROBO Global provides its expertise to the ROBO Global Robotics and Automation Index ETF (NYSEARCA:ROBO), which was up slightly at $37.77.

Lisa Chai, senior research analyst at ROBO Global said that despite a challenging backdrop, Nvidia’s outlook indicates “recovery is coming later this year.”

“Segments of the businesses they are in are going to be lumpy, but Nvidia’s story is intact and it’s beyond what they are providing for the data center industry,” said Chai. “We remain bullish on Nvidia’s long-term growth opportunity and strongly believe they will return to delivering on their upside momentum over the coming years.”

Chai noted that Nvidia is involved in “all of the secular growing business segments” with their solution sets for data centers, gaming, autos and visualization markets.

ROBO Global provides its expertise to the ROBO Global Robotics and Automation Index ETF (NYSEARCA:ROBO), which was rose 1.11% to $38.19.

-- (Updates with comments from analysts at ROBO Global) -- 

Contact Uttara Choudhury at [email protected]

Follow her on Twitter@UttaraProactive 

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Price: $39.29

Market: NYSE
Market Cap: $2.19 billion
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