Nvidia on Wednesday far exceeded its quarterly revenue forecast and said it would buy back $25 billion (Rs 206,318 crore) in shares as the artificial intelligence (AI) boom spurred demand for its chips , causing its share price to soar. Hour.

Nvidia’s forecast was billions of dollars ahead of expectations, showing no signs of slowing down in the boom in generative artificial intelligence technologies that can read and write like humans and are powered almost entirely by Nvidia’s chips.

Nvidia announced an additional $25 billion in stock buybacks on Wednesday, and its shares have tripled this year, making the company’s first multi-trillion-dollar chip business ever, as investors bet that Nvidia will become a major player in the artificial intelligence boom. beneficiaries.

The analyst estimates that demand for Nvidia’s prized AI chips will exceed supply by at least 50%, adding that the imbalance will persist in the coming quarters.

“Companies around the world are transitioning from general-purpose computing to accelerated computing and generative artificial intelligence,” Nvidia CEO Jensen Huang said in a statement.

Shares of Santa Clara, Calif.-based Nvidia rose 9.6% after hours to hit an all-time high.

But the company’s entire AI system, not just its chips, was the biggest contributor to growth in the quarter, according to company executives. Although Nvidia is best known for its graphics processing units (GPUs), it uses memory chips and tens of thousands of other parts from other suppliers to produce entire AI machines.

The Nvidia report boosted shares of other big tech and artificial intelligence-related companies, with Microsoft up 1.9%, Meta Platforms up 2.1% and Palantir Technologies surging 4.6% in after-hours trading on Wednesday.

“In our view, this result is a ‘drop the mic’ moment that will have knock-on effects for the rest of the year in tech,” said Daniel Ives, an analyst at Wedbush Securities. reaction.”

Everyone from artificial intelligence startups to major cloud service providers like Microsoft is looking to get more Nvidia chips. Demand in China is also growing faster, as Chinese companies place rush orders to stockpile chips ahead of further U.S. export curbs.

Finance chief Colette Kress told analysts on a conference call that if the U.S. imposes additional export restrictions on artificial intelligence chips sold to China, there would be no immediate impact on the company’s results. Such control would “result in the permanent loss of the opportunity for US industry to compete and lead in one of the world’s largest markets”.

The company expects third-quarter revenue of around $16 billion (Rs 1,32,082 crore), plus or minus 2%. Analysts polled by Refinitiv expected $12.61 billion (Rs 1,040.93 billion).

Adjusted revenue came in at $13.51 billion (Rs 111,518 crore) in the second quarter, against an estimate of $11.22 billion (Rs 926.09 crore).

Revenue from the company’s data center business rose 141 percent to $10.32 billion (Rs 85,185 crore) in the quarter ended July 30, beating analysts’ expectations of $7.69 billion (Rs 85,185 crore), according to Refinitiv data. 634.76 billion rupees) more than $2 billion. .

“The second-quarter results underscore its dominance in capitalizing on momentum in AI,” said Jacob Bourne, senior analyst at Insider Intelligence. Crucial.”

To this end, Nvidia spent huge sums of money to ensure supply. The company reported that inventory commitments rose 53% from the previous quarter to $11.15 billion, largely due to long-term supply needs for its data center chips.

Analysts expect revenue from Nvidia’s data center unit to expand to $40 billion in fiscal 2025, according to estimates from Refinitiv, driven largely by Nvidia’s growth in AI chips and other related technologies, such as the software that uses those chips to power its products. ) advantages. Just like ChatGPT.

While key AI chips from rival Advanced Micro Devices are expected to steal some market share from Nvidia next year, Nvidia’s software is years ahead of its CUDA rival, ROCm, according to analysts.

Weak sales of chips used in personal computers and data centers have hurt the chip industry in recent months. But artificial intelligence is a bright spot, with cloud-computing companies and startups alike buying AI-related chips from Nvidia and others such as Broadcom and Marvell Technology.

Analysts expect artificial intelligence spending to continue to grow, but at the expense of other traditional server equipment.

Revenue in Nvidia’s gaming unit rose to $2.49 billion, topping analysts’ expectations of $2.4 billion, according to Refinitiv data.

Excluding other items, the company earned $2.70 a share in the second quarter, compared with expectations for $2.09, according to Refinitiv data.

Nvidia expects adjusted gross margin for the current third quarter to be 72.5%, plus or minus 50 basis points. Analysts on average had forecast a gross margin of 70.4 percent, according to Refinitiv data.

© Thomson Reuters 2023

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