(Bloomberg) — Nvidia Corp. soared in early trading after announcing new surprising revenue forecasts, adding new momentum to a stock rally that has already made it the world’s most valuable chipmaker.
Most Read Articles on Bloomberg
The company said in a statement Wednesday that it expects sales for the current period to be about $24 billion. Analysts’ average estimate was $21.9 billion. Fourth-quarter results also far exceeded Wall Street expectations.
Thanks to insatiable demand for Nvidia’s artificial intelligence accelerators, the invaluable chips that process data for AI models, this outlook becomes increasingly exciting. This technology is helping to popularize chatbots and other generative AI services that can create text and graphics based on simple prompts.
“Accelerated computing and generative AI have reached a tipping point,” CEO Jensen Huang said in a statement. “Demand is surging around the world, across companies, industries and nations.”
The company’s stock rose about 13% in premarket trading Thursday following the announcement. It closed at $674.72 in New York, up 36% for the year.
Nvidia’s market capitalization has increased by more than $400 billion this year, bringing its valuation to $1.7 trillion. Investors are betting the company will remain the biggest beneficiary of the AI computing boom.
This makes Wednesday’s report a long-awaited event for both Wall Street and the technology industry. And the numbers, combined with Mr. Hwang’s upbeat tone, renewed confidence that spending will remain strong.
Shares of Advanced Micro Devices Inc., Broadcom Inc. and Marvell Technology Inc. (three other chipmakers expected to benefit from AI growth) also rose in late trading.
“The entire market is watching this report and expectations are high,” Wolf Research analyst Chris Caso said in a note. The guidance was strong enough to “demonstrate continued momentum while also leaving room for continued upside through the second half.”
new cycle
Huang said on a conference call with analysts that demand for Nvidia’s latest products will continue to outstrip supply for the rest of the year. He said that while supply is increasing, demand shows no signs of slowing.
“Generative AI has started a whole new investment cycle,” Huang says. This will double the global data center installed base over the next five years, he said, “creating a market opportunity in the hundreds of billions of dollars a year.”
Nvidia, co-founded by Huang in 1993, started as a provider of graphics cards for computer gamers. Its profile has exploded over the past two years as its technology has proven adept at handling heavy AI workloads. The company’s H100 accelerators are legendary in the technology world, and customers are scrambling to get their hands on as many accelerators as possible.
Companies such as Amazon.com Inc., Meta Platforms Inc., Microsoft Corp., and Alphabet Inc.’s Google are Nvidia’s biggest customers and are increasing their revenue as they rush to invest in hardware for AI computing. It accounts for nearly 40% of the total.
In its fiscal fourth quarter, which ended Jan. 28, Nvidia’s revenue more than tripled to $22.1 billion. Earnings, excluding certain items, were $5.16 per share. Analysts had expected sales of about $20.4 billion and earnings of $4.60 per share. Highlighting the magnitude of the recent sequential growth: As recently as 2021, Nvidia didn’t generate that much revenue in a single year.
Nvidia’s data center division, currently the company’s largest source of revenue, generated $18.4 billion in revenue, up 409% year over year. Sales of gaming chips were $2.87 billion.
Nvidia is currently working to popularize its AI technology beyond major data center companies. Huang, 61, has traveled the world advocating that governments and businesses need their own AI systems to protect data and gain a competitive advantage.
Earlier this month, Nvidia announced a deal with Cisco Systems Inc. that gives it a new distribution channel. As part of this agreement, Cisco, the world’s largest network equipment provider, will help sell complete AI systems to enterprises.
Read more: Nvidia and Cisco help companies build in-house AI computing
However, NVIDIA faces risks such as increased competition and the push by some customers to develop their own AI chips.
AMD recently started selling a series of accelerators called MI300. The product is expected to generate $3.5 billion in sales this year, up from an earlier estimate of $2 billion. But NVIDIA isn’t standing still. Analysts expect the company to announce a more powerful accelerator soon.
Nvidia also has to comply with new rules for exporting chips to China, its largest semiconductor market. The company has scaled back product features to continue selling to the region, which previously accounted for a quarter of its sales. Three months ago, Chief Financial Officer Colette Kress told analysts that the company’s outlook would have been better without China’s restrictions.
When it comes to data center revenue, China accounted for a mid-single-digit share in the fourth quarter. “We expect the first quarter to remain in a similar range,” Kress said Wednesday.
Huang said the company has started sending samples of the new chip, which is compliant with the restrictions, to customers in China. Then business should pick up again.
“We’re going to do our best to compete in that market and be successful in that market,” Huang said.
(Updated pre-market trading in 5th paragraph)
Most Read Articles on Bloomberg Businessweek
©2024 Bloomberg LP
