Nvidia Reports Three-Fold Sales Increase in Another Earnings Report: ‘We’re Running Every Day,’ Says CEO Jensen Huang

“The industry is going through a major shift,” Nvidia CEO Jensen Huang said during an earnings conference call Wednesday. “The next industrial revolution has begun. Companies and countries are partnering with Nvidia to move the trillion-dollar installed base of data centers to accelerate computing and build a new type of data center, AI factories , to produce a new product, artificial intelligence.

Nvidia’s stock has been on a strong rise over the past year: it’s up 200% in the past 12 months and 87% since the start of 2024. Its explosive growth has propelled it to third place in market capitalizations in the world, above peers, including Amazon and Meta. “The most valuable stock on planet Earth,” according to Goldman Sachs, helped lift the entire S&P 500 to all-time highs, and another top profit is a positive indicator that Nvidia has no plans to slow down anytime soon.

Demand for Nvidia’s power circuits, known as graphics processing units (GPUs), and data centers has been “incredible,” Huang said. The phenomenon is largely driven by applications like ChatGPT and GPT-4, in addition to the burgeoning class of AI startups, which Huang estimates to comprise between 15,000 and 20,000 companies. And that doesn’t take into account companies focused on self-driving cars, digital character design and biotechnology companies, he said, which has led to even greater needs from customers.

“We run every day,” Huang said. “Customers are putting a lot of pressure on us to deliver the systems and put them into operation as quickly as possible. »

Over the past year, Nvidia has had no problem beating lofty expectations: It beat earnings per share estimates by an average of 20% in the four quarters leading up to Wednesday’s release. So, when it came to the earnings report, Wall Street’s expectations were high: analysts were forecasting $24.65 billion in revenue. But the $26 billion announced by Nvidia represents a 5.5% overrun of Nvidia’s data center revenue, which accounts for the majority of its overall revenue. It came in at $22.6 billion for the quarter, above Wall Street’s estimate of $21.13 billion and 427% higher than the same period last year. Nvidia’s stock price rose 4.4% in after-market trading following the earnings release, crossing the $1,000 threshold for the first time during the earnings call.

“If 10 was an incredibly good (result) on the upside, I would give it a seven or an eight,” said tech investor and finance professor at The Citadel Paul Meeks. Fortune.

Although Nvidia’s 10-for-1 stock split won’t have an immediate impact on its valuation, making the shares cheaper and more accessible to retail investors is a smart move, according to Meeks. Nvidia stock is currently trading at around $950, meaning that once the stock splits on June 7, investors will likely be able to get their hands on shares for less than $100.

“Stock splits are cosmetic… But when you get the stock down to about $100 a share, and everyone on planet Earth knows that’s the leading tech stock… I think that there are probably retail investors champing at the bit to buy it now,” Meeks said. “It’s definitely positive overall.”

The source of Nvidia’s dominance lies in its massive lead in the AI ​​hardware market. Nvidia pioneered the development of GPUs, specialized computer chips that it initially used for gaming but later shifted its focus to the AI ​​developer market as the AI ​​sector exploded.

Nvidia’s hardware game relies on significant investments in software: its CUDA programming interface, which runs exclusively on its chips, is a must-use for many AI developers, and one of the main reasons for which he was able to defend his quasi-monopoly in the field. AI space.

Nvidia’s rise has been fueled by relentless demand: The company has been forced to choose who gets chips first, as everyone from data center operators to startups to big tech , is fighting to get its hands on AI computing power, especially its high-end technologies. lineup of Blackwell and H200 chips, which the company said it plans to start shipping next quarter.

“Blackwell is in full production…Demand for the H200 and Blackwell is well above supply, and we anticipate demand could exceed supply until last year,” said the CFO of Nvidia, Colette Kress, during an earnings call.

“We will see a lot of revenue in Blackwell this year,” Huang added. And “after Blackwell, there is another flea”.

Nvidia’s activities outside of AI chip development were a relative afterthought. The company’s gaming division, once the core of its business, reported revenue of $2.6 billion, down 8% from last quarter. Its automotive division posted gains on $329 million in revenue, but Nvidia’s other lines of business pale in comparison to its investments in AI chip manufacturing.

Since the start of this year, however, Nvidia’s competitors have stepped up competition in the AI ​​hardware space. Intel, benefiting from $8.5 billion in funding under the CHIPS Act, last month launched its Gaudi 3 AI chip, which will compete with Nvidia’s high-end Blackwell model. Big Tech AI developers including Google and Microsoft have announced they are designing their own AI chips in-house to reduce their dependence on Nvidia and reduce costs.

“This combination of some big companies saying, ‘We’re going to develop our own AI chips,’ and other industries saying, ‘We’re going to do it locally on our smaller devices, for less power consumption’ – that could , in the long run, be what hinders their growth,” said Edward Wilford, an analyst at technology consultancy Omdia. Fortune.

Nvidia’s business model is not entirely vertically integrated: as a chip designer, it creates designs for semiconductors but outsources manufacturing of its most advanced chips to TSMC, the Taiwanese giant that makes more 90% of the world’s advanced chips. Frosty relations between the United States and China and the recent earthquake in Taiwan that briefly closed TSMC headquarters have some Nvidia investors on edge: any significant disruption to TSMC’s operations would be a major blow to the company. entire semiconductor supply chain.

“They will be very aware of their vulnerability to TSMC and supply disruptions. They will be watching this carefully,” Wilford said. “This is a business that you can’t just move from one region to another… They want to make sure it’s protected at all costs. This will keep some people up at night.

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