Nvidia Corp (NASDAQ: NVDA) shares surged more than 7% in pre-market trading after the company delivered quarterly results that crushed Wall Street expectations, igniting a broad rally across memory chip and optical communication stocks.
On August 27, the chip giant's earnings guidance overwhelmed market forecasts, with shares extending gains to 7% before the opening bell. The momentum spilled over to the broader semiconductor sector, as SanDisk Corp (NASDAQ: SNDK), SK Hynix Inc (KRX: 000660), Micron Technology Inc (NASDAQ: MU), and Marvell Technology Inc (NASDAQ: MRVL) all climbed more than 4% in pre-market trading.
Optical communication names also caught a bid, with Applied Optoelectronics Inc (NASDAQ: AAOI) advancing over 5%, while Coherent Corp (NYSE: COHR), Lumentum Holdings Inc (NASDAQ: LITE), and Corning Inc (NYSE: GLW) followed suit.
Where the growth is coming from
The catalyst was Nvidia's blockbuster fiscal second-quarter report, which showed revenue of $96.2 billion, a 106% year-over-year increase. During the earnings call, the company's CFO revealed that Amazon.com Inc (NASDAQ: AMZN) will deploy an additional 2 million Nvidia graphics processing units (GPUs), underscoring the relentless demand for AI compute power.
Looking ahead, Nvidia projected operating income growth of approximately 70% for fiscal 2028, far exceeding the 45% that analysts had modeled. CEO Jensen Huang noted that this marks the first time the company has provided guidance a full year in advance, a testament to the visibility the company now has into its order book.
Why the supply crunch is here to stay
Nvidia emphasized that the AI compute supply shortage will persist at least through the end of fiscal 2028. Wafer capacity, HBM memory, and data center power are all in a state of comprehensive tightness, with the company explicitly stating there is no risk of industry oversupply.
Traditional hyperscale cloud providers currently hold more than $2 trillion in outstanding orders, while non-cloud AI demand is growing at over 100% year-over-year. This suggests the strong cycle for memory and wafer fabrication is set to continue well into the future.
AI has crossed the inflection point
The broader takeaway is that AI has decisively moved beyond the concept stage. AI-generated tokens now possess real productive capacity and commercial profitability, with compute power directly translating into revenue. The industry's logic has shifted from "technology iteration" to "commercial monetization."
Goldman Sachs highlighted that one of the most important signals from Nvidia's results is that AI compute demand remains exceptionally strong, with supply capacity emerging as the primary constraint on revenue growth. As Vera Rubin enters mass production and shipment, and as hyperscalers, enterprises, and sovereign AI initiatives continue expanding their infrastructure investments, the company's revenue trajectory retains significant upside.
Wall Street responds with price target hikes
Following the earnings release, several major financial institutions raised their price targets on Nvidia. Melius Research lifted its target from $400 to $420, RBC Capital Markets increased its target from $300 to $330, and JPMorgan raised its target from $280 to $320.
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