Investment

Investors Scramble as Nvidia’s Sales Defy Projections in AI Surge

Published

3 months ago

June 24, 2024

Nvidia Corp., the renowned chipmaker, defies sales projections driven by an unprecedented boom in artificial intelligence (AI).

This surge has propelled Nvidia to become the most expensive stock in the S&P 500 Index, with shares trading at roughly 23 times the company’s projected sales over the next 12 months.

For more than a year, Nvidia has experienced a meteoric rise in demand for its chips, fueled by the frenzy surrounding AI advancements.

This demand has rendered traditional financial estimates obsolete, leaving even Nvidia’s executives struggling to accurately predict the company’s future revenue.

Since the chipmaker’s sales began skyrocketing in the fiscal quarter ending April 2023, revenue has consistently exceeded company forecasts by an average of 13%, a figure more than double the average over the past decade.

The most notable instance occurred in August, when Nvidia’s sales surpassed its projections by an astounding 23%, marking the biggest beat since at least 2013.

A representative for Nvidia declined to comment on the company’s revenue projections and the challenges in forecasting amidst the AI boom.

The challenge of modeling Nvidia’s future earnings lies largely in the unpredictability of supply amid surging demand.

Brian Colello, an analyst at Morningstar, highlighted this issue, noting that Nvidia’s situation is unique.

“Assuming steady improvement in Nvidia’s ability to increase supply, I add up to $4 billion to Nvidia’s quarterly revenue to ballpark the upcoming quarter’s sales,” Colello explained.

He recently raised his price target for Nvidia shares to $105 from $91, though they are currently trading around $127.

Colello is not alone in his optimistic adjustments. Ben Reitzes, an analyst at Melius, has raised his price target on Nvidia five times this year, most recently to $160, implying a 26% gain from recent closing prices.

The market’s enthusiasm is evident as Nvidia’s stock has surged 156% this year, briefly overtaking Microsoft Corp. to become the world’s most valuable company at $3.34 trillion.

This rally has contributed to a record $8.7 billion inflow into tech funds last week, according to Bank of America Corp.’s analysis of EPFR Global data.

However, Nvidia shares have since fallen 6.7%, erasing over $200 billion in market value.

For investors relying on discounted cash flow models, the gap between estimates and actual results has created a conundrum.

In the past five quarters, analyst estimates for Nvidia’s sales have deviated from actual results by an average of 12%, the third-highest among S&P 500 companies with average quarterly revenues exceeding $5 billion.

Despite the challenges in forecasting, Nvidia’s growth remains impressive. The company is projected to deliver a profit of $14.7 billion on sales of $28.4 billion in the current quarter, reflecting increases of 137% and 111%, respectively, from the same period a year ago.

Comparatively, Microsoft’s sales are expected to rise 15%, with Apple’s projections sitting around 3%.

While Nvidia’s valuation multiples are high, they appear more reasonable considering the company’s growth trajectory.

However, Michael O’Rourke, chief market strategist at Jonestrading, cautions that the extent of Nvidia’s outperformance may diminish due to its sheer size, potentially making it harder to justify the current stock price.

“That’s where the risk comes in,” O’Rourke said. “You’re paying a high price for a large market cap company where the beats have been trending lower, and that’s likely to continue.”

As Nvidia continues to navigate the unpredictable waters of the AI surge, investors and analysts alike are left grappling with the challenge of accurately predicting the company’s future in an era of unprecedented technological advancement.

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Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Investment

Contractor Speaks About Completion Timeline For Port Harcourt Refinery

Published

7 hours ago

September 28, 2024

Ugwoke Ogbodo

Following outrage on the recurring delays in the completion of the Port Harcourt Refinery rehabilitation project, the contractor overseeing the facility rehabilitation has said it would soon release an update on when the project will be completed.

The contractor, Maire Tecnimont SpA, announced that it will provide details on the project’s completion by or before October 2.

Responding to a letter from human rights lawyer Femi Falana, who had inquired about the completion timeline for the refinery’s rehabilitation, the contractor, through the law firm Olajide Oyewole LLP, acknowledged Falana’s request and promised to give details next week.

The law firm stated that its client, Tecnimont, had received his letters dated September 17 and 24, 2024 regarding the contract with the Nigerian National Petroleum Company (NNPC) Limited and is considering the inquiries.

According to the law firm, “Our client is considering your letters and they intend to get back to you on or before 2 October 2024.”

The $1.5 billion engineering, procurement, and construction (EPC) contract for the rehabilitation of the Port Harcourt refinery was signed between the Nigerian National Petroleum Corporation (NNPC) – before becoming a public company – and Tecnimont on April 6, 2021.

Timipre Sylva, the former minister of state for petroleum, had initially stated that the rehabilitation would occur in three phases, lasting 18, 24, and 44 months, respectively.

However, despite NNPC’s announcement on December 21, 2023, that the mechanical phase of the refinery’s turnaround maintenance was completed, and the facility was ready, there have been ongoing delays.

On March 15, Mele Kyari, NNPC’s group chief executive officer (GCEO), said that production would begin by the end of that month, but this target was missed.

Kyari later set a new deadline for early August, yet the refinery still did not commence production.

On 5 September, Adedapo Segun, NNPC’s executive vice-president of downstream operations, said that despite the mechanical completion in December 2023, further safety checks were necessary to ensure the refinery’s safe operation.

Segun emphasised that NNPC would not rush into production simply to meet a deadline if there were unresolved safety concerns.

Investment

ExxonMobil Proposes $10bn Investment in Deep-Water Oil Operations in Nigeria

Published

2 days ago

September 26, 2024

Ugwoke Ogbodo

An American multinational oil and gas corporation, ExxonMobil, has disclosed its plan to launch a $10 billion investment in Nigeria’s deep-water oil operations.

The Chairman and Managing Director of ExxonMobil Affiliates in Nigeria, Shane Harris, reaffirmed the company’s commitment to investing in Nigeria during a high-level meeting with Vice President Kashim Shettima on the sidelines of the ongoing 79th Session of the United Nations General Assembly in New York, United States.

Harris, who led other ExxonMobil executives to the meeting, noted that the company’s commitment to Nigeria remains unwavering.

He said, “As we celebrate 70 years of oil production and 8 billion barrels produced, we’re not retreating but refocusing our investments on deep-water opportunities.”

The centerpiece of ExxonMobil’s new strategy is the Owo project, a substantial subsea tie-back that could represent a $10 billion investment.

Harris further disclosed that ExxonMobil is working closely with the president’s office and the Special Adviser to the President to secure favorable fiscal arrangements to make the significant investment possible.

Despite the planned divestment of its onshore assets to Seplat Energy, ExxonMobil aims to inject $1 billion annually into maintenance operations and an additional $1.5 billion to boost production by 50,000 barrels per day over the next few years.

Buying into the investment proposal, Nigeria’s Vice President Shettima described it as a clear testament to the Federal Government’s economic reforms and investment-friendly policies.

According to Shettima, ExxonMobil’s potential investment aligns perfectly with President Bola Tinubu’s vision for a more investment-friendly Nigeria.

He promised the oil and gas company an enabling environment for the investment.

The vice president elaborated on the Tinubu administration’s efforts to ensure the ease of doing business in Nigeria, adding that the Renewed Hope Agenda places a strong emphasis on this priority.

He noted that the current administration has initiated comprehensive reforms to streamline bureaucratic processes, enhance transparency, and provide fiscal incentives that make Nigeria an attractive destination for global investors.

Addressing the specific concerns of the oil and gas sector, Shettima stated that the government is committed to revising the fiscal framework for deep-water operations. He said the federal government’s goal is to strike a balance between attracting investments and ensuring fair returns for the Nigerian people.

In a related development, an international maritime giant, DP World, has announced plans to develop a multibillion-dollar port project in Nigeria.

The Group Chairman & CEO of DP World, Sultan Ahmed bin Sulayem, revealed the company’s intentions during a courtesy visit to Shettima on the sidelines of the ongoing United Nations General Assembly in New York.

The proposal comes as a direct response to President Tinubu’s aggressive investment drive and efforts to improve the ease of doing business in the country.

Investment

Vice President Shettima Calls on Global Investors to Trust Nigeria’s Economic Reforms at UNGA

Published

3 days ago

September 25, 2024

Bassey Marshall

Nigeria’s Vice President, Kashim Shettima, has urged investors at the United Nations General Assembly (UNGA) to give the country the benefit of the doubt.

The Vice President, who attended the 79th UNGA on behalf of President Bola Tinubu, praised the current administration as the most investor-friendly in Nigeria’s history.

Vice President Shettima departed Abuja for the United States on Sunday to attend the 79th UNGA.

The trip was announced in a statement by Stanley Nkwocha, Senior Special Assistant to the President on Media and Communications, on Sunday.

Nkwocha stated that during the session, Shettima would deliver Nigeria’s national statement, participate in key meetings on the sidelines of the event, and engage with investors.

At the event, Shettima highlighted Tinubu’s efforts to revive the country’s economy by removing the fuel subsidy and unifying the foreign exchange markets.

He said, “I urge you to give Nigeria the benefit of the doubt. The current administration, led by President Bola Ahmed Tinubu, is the most investor-friendly administration in Nigeria’s history.

“When the fuel subsidy was an albatross around Nigeria’s neck, President Tinubu hit the ground running from day one by withdrawing the subsidy and unifying the multiple opaque foreign exchange markets.”

Investors King gathered that Shettima’s engagement with investors has so far garnered $320 million in investment commitments.