(Bloomberg) – Nvidia Inc., the chipmaker at the center of the artificial intelligence boom, rose in late trading after bullish sales forecasts showed AI computing spending remains strong.
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The company on Wednesday announced second-quarter sales of about $28 billion, beating analysts' expectations of $26.8 billion. Results for the first quarter ended April 28 also exceeded expectations due to growth in Nvidia's data center division.
The big question heading into the report was whether Nvidia's latest numbers could justify the dizzying rise in its stock price, which had risen 92% this year through Wednesday's close, buoyed by investor hopes that the company would continue to smash expectations.
The report did not disappoint, and CEO Jensen Huang stirred excitement by talking about the dawn of a new era. “This is the beginning of a new industrial revolution,” he said in an interview, repeating one of his favorite themes. “I'm really excited.”
The brightening outlook bolsters Nvidia's position as the biggest beneficiary of AI spending. The company's so-called AI accelerators – chips that help data centers develop chatbots and other cutting-edge tools – have become hot commodities over the past two years, sending sales soaring. Nvidia's market valuation has also soared, to more than $2.3 trillion.
In its fiscal first quarter, Nvidia's revenue more than tripled to $26 billion. Earnings, excluding certain items, were $6.12 per share. Analysts had expected sales of about $24.7 billion and earnings of $5.65 per share.
Shares rose as much as 7.8% in extended trading on Wednesday, topping $1,000 for the first time. The Santa Clara, California-based company also announced a 10-for-1 stock split and increased its quarterly dividend 150% to 10 cents per share.
This increase also contributed to the rise in the stock prices of other AI-related companies. Supermicro Computers, Advanced Micro Devices, and Dell Technologies all saw their stock prices rise following their earnings results.
Wearing his signature black leather jacket, Huang has become a celebrity in the AI era. His company, which he co-founded in 1993, started as a provider of graphics cards for computer gamers. However, he realized that his Nvidia chips were suitable for developing his AI software and that it could help open new markets, allowing him to jump on a competitor.
Then, with the release of OpenAI's ChatGPT chatbot in 2022, a race began among major technology companies to build their own AI infrastructure. This scramble has made Nvidia's H100 accelerator a must-have product. These sell for tens of thousands of dollars per chip and are often in short supply.
For now, most of that new revenue is coming from a handful of customers. Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. and Alphabet Inc.'s Google are Nvidia's four biggest buyers, accounting for about 40% of sales. Mr. Huang, 61, is focusing on making complete computers, software and services to help more companies and government agencies deploy their own AI systems.
Nvidia's data-center division is now by far its largest revenue driver, bringing in $22.6 billion last quarter, compared with $2.6 billion from gaming chips. Analysts were targeting $21 billion for the data-center division and $2.6 billion for the gaming division.
If the after-hours stock price rally holds through Thursday's regular trading, Nvidia's valuation will increase by about $140 billion. That's more than the entire market capitalization of Intel, the chipmaker that once dwarfed Nvidia in every way. Also, Nvidia's quarterly revenue forecast of $28 billion is more than double the revenue Intel is projecting.
Nvidia stressed on Wednesday that it wants to sell its technology to a broader market, beyond the giant cloud-computing providers known as hyperscalers. Huang said AI is shifting to consumer internet companies, automakers, biotech and health care customers. Countries are also developing their own systems, a trend known as sovereign AI.
These opportunities are creating multiple multi-billion dollar markets beyond cloud service providers, he said.
One sign of that expansion is the widespread adoption of Nvidia chips by Elon Musk's Tesla Inc. The automaker uses Nvidia equipment to develop the software that operates its self-driving cars.
Still, hyperscalers remained a key growth driver for Nvidia last quarter. They generated about 45% of the company's data center revenue, suggesting that Nvidia is in the early stages of diversifying its business.
The company's new chip platform, Blackwell, is now in full production and is the foundation for generative AI that can process trillions of parameters, Huang said. “We're preparing for the next wave of growth,” he said.
Huang said the company will get “a lot” of its revenue from Blackwell's new chips in 2024. But customers aren't slowing down on orders for existing products, which has some analysts concerned. Those buyers need the current generation of chips to build out their infrastructure as quickly as possible, he said.
Demand for Nvidia products exceeds supply, and Huang expects this to continue next year. The company is also tackling other challenges. The increased complexity of the company's technology, which now includes complete computer systems, means the supply chain has become even more complex, he said. This will make it even more difficult to increase production.
“Nobody has mass-produced a supercomputer before,” he said in an interview. “We're doing our best.”
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