Nvidia’s Sales Soar as AI Spending Boom Barrels Ahead
AI chip giant gives strong outlook, pointing to healthy demand for next-generation chips
Nvidia’s NVDA -0.76%decrease; red down pointing triangle sales surged in its latest quarter and profits nearly doubled, a sign of the strength of an artificial intelligence boom that has made the company the world’s most valuable.
Nvidia on Wednesday also projected around $37.5 billion of revenue for its current quarter, topping forecasts and suggesting its next-generation AI chips, known as Blackwell, are in high demand from customers like Microsoft, Google, Meta and Elon Musk’s xAI.
The company, whose chips have powered the rise of AI technology, said it expects the Blackwell chips to ship in the current quarter and be in short supply into its next fiscal year.
Sales were $35.1 billion in the fiscal third quarter, the company said, up 94% from a year prior and ahead of forecasts in a FactSet survey of analysts. Profit reached $19.3 billion, also ahead of Wall Street forecasts.
Nvidia Chief Executive Jensen Huang said in a release that demand for its current generation of chips and for Blackwell was “incredible” as leading AI developers scale up their computing infrastructure.
Nvidia’s shares fell 2% in after-hours trading, however, with the results falling short of some investors’ expectations following several quarters of sky-high revenue and profits.
Nvidia’s market capitalization has increased by $2.36 trillion in 2024 through Wednesday’s close, greater than the entire current value of Google parent Alphabet.
Led by Huang since its founding in 1993, Nvidia has engineered a stunning rise to the top of the semiconductor world over the past two years. Nvidia’s chips—initially developed to improve computer graphics—were well-suited to AI tasks and big tech companies began investing tens of billions of dollars to build advanced AI tools.
So hot was the demand that Nvidia couldn’t keep up with it, and its chips became the most coveted products in the tech industry.
Huang’s tech celebrity rose into a stratosphere occupied by visionaries like the late Apple co-founder Steve Jobs. Revenue and profits rose to unprecedented levels, and the stock surged, roughly tripling this year alone. It hit a $2 trillion valuation in February, crossed the $3 trillion mark in June, and reclaimed the title of world’s most valuable company earlier this month.
Analysts had been expecting a strong quarter for Nvidia following earnings reports from big tech companies that outlined rising capital spending. With the AI boom, much of the tech giants’ spending goes toward Nvidia’s chips.
The company’s rise has come with complications. In its previous earnings report in August, Nvidia blamed engineering issues with Blackwell chips for narrower profit margins and a $908 million provision. Despite the hiccup, the company has stuck to an expectation that Blackwell will bring in several billion dollars of revenue in its current quarter, which ends in January.
Nvidia Chief Financial Officer Colette Kress said in prepared remarks Wednesday that the company had completed tweaks in Blackwell’s design that improved their manufacturing yields. She said production shipments were expected in the current quarter, and that demand was expected to exceed supply for several quarters in its next fiscal year.
Nvidia’s increased size over the last two years means it is getting harder for the company to sustain its dramatic revenue growth rates. Revenue more than tripled in its quarter ended in April, but has lost pace in the two quarters since.
Nvidia is also being challenged by rivals including Advanced Micro Devices, which expects to sell $5 billion of AI chips this year, and by a crop of AI chip startups offering newfangled approaches to the computations that underlie the most advanced AI models. Some of its biggest customers, including Amazon.com and Google, also have been working to develop their own AI chips and reduce dependence on Nvidia.
And antitrust regulators in Europe and the U.S. are looking closely at Nvidia’s business given its dominance in the market: Analysts estimate it has more than an 80% share in AI chips.
To keep its edge, Nvidia is leaning into new markets and uses for its chips, including drug-discovery applications, humanoid robots and a push by countries to invest in national AI infrastructure. Nvidia expects so-called sovereign AI investments to add $10 billion to its sales this year from zero last year.