Already a star in the tech industry’s artificial intelligence computing race, Nvidia once again issued a shockingly strong quarterly revenue forecast, fueled by a surge in demand for artificial intelligence processors.
Nvidia shares surged more than 8 percent in after-hours trading after Nvidia said sales would reach about $16 billion in the three months through October. Analysts had estimated just $12.5 billion, according to data compiled by Bloomberg. Nvidia also beat expectations last quarter and approved an additional $25 billion in share repurchases.
The prospect underscores Nvidia’s role as a major beneficiary of the AI computing boom. Faced with growing demand for chatbots and other tools, data center operators are stockpiling the company’s processors, which are good at handling the heavy workloads required by artificial intelligence. That helped Nvidia quickly emerge from an industry-wide chip downturn and accelerate sales growth to its fastest pace in years.
“A new era of computing has begun,” CEO Jensen Huang said in a statement. Companies around the world are moving from general-purpose approaches to ones that can handle accelerated computing and ChatGPT-style generative AI, he said.
The after-hours gains more than tripled the stock’s gain for the year. The stock closed at $471.16 in New York on Wednesday, ahead of Nvidia’s quarterly report.
The Santa Clara, Calif.-based company said revenue doubled to $13.5 billion in the fiscal second quarter ended July 30. After deducting certain items, profit per share was $2.70. Analysts had forecast sales of about $11 billion and a profit of $2.07.
Nvidia becomes first semiconductor company to receive award trillion dollar market After valuation another blowout quarter in May. It has become a major supplier of the infrastructure needed to support the growing use of artificial intelligence systems. But investors have been waiting for more evidence that the second quarter was the start of a long expansion rather than a one-off spike. The results they got Wednesday were even more optimistic than expected.
Underscoring Nvidia’s impressive growth, Nvidia’s revenue target for the quarter topped Wall Street forecasts by 28% and nearly matched the company’s total annual sales in 2021.
Nvidia was co-founded in 1993 by Jensen Huang, who still runs the company. He successfully leveraged a business that makes graphics chips for video games to dominate the market for so-called accelerators, chips that help train artificial intelligence software by bombarding them with data. Nvidia quickly rolled out more powerful processors and accompanying software, leaving would-be rivals far behind. Customers such as Microsoft Corp. and Alphabet Inc. Meanwhile, Google is lining up to buy as many chips as Nvidia can supply.
According to Bloomberg:
“The sharp increase in Q2 and a repeat of Q1 performance point to continued strong demand in Nvidia’s data center (DC) business, while Q3 guidance, which was 29% above consensus, means the company could earn better than Expected supply. Gross margins likely to continue to rise (112bps above consensus) with increasing DC contribution.”
Like many of its peers, Nvidia does not make its own chips, but relies on outsourced manufacturing provided by TSMC and Samsung Electronics. This arrangement frees it from the huge expense and risk of manufacturing investment. But it also reduces its ability to quickly adjust supply.
There were concerns that supply constraints could hamper Nvidia’s sales this quarter, but its forecasts suggest operations are running smoothly.
Nvidia’s once sideline business, which supplies chips to data centers, is now its biggest moneymaker. The unit posted sales of $10.3 billion last quarter, compared with expectations for $7.98 billion. Game revenue was $2.49 billion, compared with analysts’ average forecast of $2.38 billion. Automotive-related chips brought in $253 million in revenue.
Artificial intelligence has been the hottest topic among tech investors this year, with companies talking up their capabilities in the field. But Nvidia is one of the few companies making big money from the trend, which has accelerated since the public debut of OpenAI’s ChatGPT in November. The tool helped demonstrate the incredible potential of generative artificial intelligence to a wider audience.
Shares of Nvidia are up more than 200% this year, outperforming all other stocks in the closely watched Philadelphia Stock Exchange Semiconductor Index.
Nvidia has also become more important as a bellwether in the technology industry. The chipmaker’s forecast offers a window into the plans of some of the world’s most valuable companies and shows how much those businesses are willing to spend to overhaul computer systems to accommodate artificial intelligence.
Meanwhile, other chipmakers are trying to catch up to Nvidia in artificial intelligence processors, including top PC chipmakers AMD and Intel. But Nvidia is constantly upgrading its products and releasing related software and services, aiming to maintain its edge.