Stocks rose on Friday, and the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) both closed at record highs.
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Today's stock market
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Semiconductor stocks led the market, and the iShares PHLX Semiconductor ETF (NASDAQ: SOXX) closed up 1.8%. Healthcare stocks slumped; the Health Care Select Sector SPDR ETF (NYSEMKT: XLV) fell 0.3%.
As for individual companies, shares of NVIDIA (NASDAQ: NVDA) rose following bullish comments from an analyst, and Oracle Corporation (NYSE: ORCL) stock stumbled after the tech titan announced strong quarterly earnings but gave disappointing guidance.
NVIDIA jumps on raised target price
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Shares of NVIDIA rose 6.3% to a record high after analyst C.J. Muse from Evercore ISI reiterated his outperform rating on the chipmaker and raised the price target from $180 to $250, 39% above the closing price today. In a letter to clients sent after meeting with company management, the analyst cited underappreciated potential in artificial intelligence (AI) applications as a reason why he believes the stock is undervalued.
NVIDIA has spent 12 years developing a parallel computing architecture called CUDA, which includes tools that developers can use to build AI solutions by programming the company's graphics processing units (GPUs) to do complex computations in parallel. The architecture and computing approach, called a "home run" by CEO Jensen Huang in the latest conference call, is finding its way into a rapidly growing number of new applications as AI takes hold. NVIDIA bulls think this market opportunity is still in the early stages and that CUDA gives NVIDIA a big first-mover advantage in GPU-assisted parallel computing.
Last quarter, NVIDIA delivered stunning 56% revenue growth, with GPU sales growing 59%, driven by applications such as gaming, cryptocurrency mining, and a whopping 175% increase in sales to the data center market, which is where most of the AI applications for the company's GPUs presently are. Most of the company's recent sales gains have come from gaming systems, but with the rapidly growing data center market only accounting for 19% of NVIDIA's revenue, AI may indeed fuel the next wave of growth for this market darling.
Oracle beats but gives subdued guidance
Oracle announced fiscal first-quarter results that beat expectations on both revenue and earnings, but issued forward guidance that left the market wanting, and shares fell 7.7%. Revenue was up 7% from last year to $9.2 billion, and non-GAAP earnings per share grew 12% to $0.62. Analysts were expecting the company to earn $0.60 per share on revenue of $9 billion.
Looking ahead to the second quarter, the company guided to revenue growth of 2% to 4%, short of what analysts were expecting, and EPS of $0.64 to $0.68, while the consensus estimate was $0.68. However, executives in the call said currency effects may add as much as another 3% to the revenue estimate and $0.02 to EPS.
The highlight for Oracle was its rapidly growing cloud business, which executives focused on in the report. "The sustained hyper-growth in our multi-billion dollar cloud business continues to drive Oracle's overall revenue and earnings higher and higher," said CEO Safra Catz in the press release.
Oracle executives compared their cloud business growth favorably with salesforce.com and Workday, and touted technological advantages over AWS from Amazon. But unlike those companies, Oracle is saddled with legacy application license and hardware sales that continue to shrink, and much of its cloud business is aimed at existing database customers migrating from servers to cloud. The strategy is succeeding as the cloud business grows as a proportion of the total, yielding low-single-digit growth and improving margins. But investors were apparently hoping for a more upbeat outlook for next quarter.
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Jim Crumly owns shares of AMZN, NVIDIA, and CRM. The Motley Fool owns shares of and recommends AMZN, NVIDIA, and Workday. The Motley Fool owns shares of Oracle. The Motley Fool recommends CRM. The Motley Fool has a disclosure policy.