Why Nvidia Stock Advanced on Wednesday
What happened
Advanced Micro Devices (NASDAQ: AMD) delivered a "beat and raise" quarter last night, and this morning AMD stock is up more than 7% in early trading -- but AMD isn't the only stock benefiting from the news.
As of 10:20 a.m. ET, Nvidia (NASDAQ: NVDA) -- AMD's archrival in graphics chips -- is rushing ahead 3%.
Image source: Getty Images.
So what
AMD "beat earnings" with a stick last night, reporting $0.92 per share in profit where Wall Street had forecast only $0.76 and delivering $4.8 billion in revenue where the forecast was for only $4.5 billion.
On top of that, AMD said its revenues this year should be as high as $21.5 billion, reports TheFly.com, versus consensus estimates of only $19.3 billion -- so it'll be an even better year for semiconductor sales than analysts had anticipated, with revenues rising 31% year over year. Fiscal Q1 2022 alone could see AMD deliver sales of "approximately $5.0 billion, plus or minus $100 million," AMD predicted, "an increase of approximately 45 percent year-over-year."
Now what
AMD said "all [of its] businesses" will produce higher sales this year, with servers and client processors being particularly strong businesses in Q1. This broadly positive business environment for semiconductors can be expected to benefit not just AMD, though, but all chip companies -- Nvidia included.
All that being said, it's worth pointing out that heading into last night's report, analysts were forecasting that AMD would grow revenues 29% this year, according to data from S&P Global Market Intelligence, so the company's prediction of 31% revenue growth is a very positive surprise. In contrast, these same analysts are already expecting Nvidia to grow its revenues by 60% in 2022.
It's going to be a whole lot harder for Nvidia to exceed that big number this year than it was for AMD to beat its smaller revenue growth target. With a P/E ratio of 70, there's also a lot more risk in Nvidia stock if it should fail to measure up to expectations.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
