Shares of Nvidia Corp, the chipmaker at the center of the artificial intelligence boom, rose on Thursday after a bullish sales forecast showed that computing spending AI still strong.
Second-quarter revenue will be about $28 billion, the company announced Wednesday, exceeding the $26.8 billion expected by analysts. Results for the fiscal first quarter, which ended April 28, also beat estimates, driven by growth in the company’s data center division.
The big question ahead of the results report was whether the latest figures for Nvidia would justify the dizzying rise of its shares. The stock had gained 108% this year through Wednesday’s close, boosted by investors’ hopes that the company would continue to beat expectations.
The report did not disappoint, and the CEO, Jensen Huang, fueled enthusiasm by speaking of the dawn of a new era. “This is the beginning of a new industrial revolution,” he said in an interview, echoing one of his favorite themes. “This is really exciting,” she added.
The shares rose as much as 9.2% to $1,036.76 on Thursday, adding about $217 billion to its valuation. This figure is higher than the market capitalization of Intel Corpa chip maker that once eclipsed Nvidia in all aspects. Additionally, the company’s projected quarterly sales of $28 billion would more than double those of Intel.
The company based in Saint Clare, California, also announced a 10-for-1 stock split and increased its quarterly dividend by 150%, to 10 cents per share. The rise helped to revalue the shares of other companies related to the AI. Super Micro Computer Inc., Advanced Micro Devices Inc. and Dell Technologies Inc. They rose after the results.
The optimistic outlook reinforces the status of Nvidia as the largest beneficiary of spending on artificial intelligence. The company’s so-called AI accelerators – chips that help data centers develop chatbots and other cutting-edge tools – have become a hot commodity in the past two years, skyrocketing their sales. The corporation’s market valuation has also skyrocketed, surpassing $2.3 trillion.
In the first fiscal quarter, revenues from Nvidia They more than tripled to $26 billion. Excluding certain items, earnings were $6.12 per share. Analysts had forecast sales of about $24.7 billion and earnings of $5.65 per share.
Huang, in his signature black leather jacket, has become a celebrity in the age of artificial intelligence. His company, which he co-founded in 1993, began as a supplier of graphics cards for computer gamers. But he realized that the chips Nvidia They were ideal for developing software AIwhich helped it open a new market and get ahead of its competitors.
The launch of the chatbot ChatGPT of OpenAI in 2022 then triggered a race among major technology companies to build their own AI infrastructure. The struggle made the H100 accelerators Nvidia in an essential product. They sell for tens of thousands of dollars per chip and are often in short supply.
For now, much of this new revenue comes from a small handful of customers. A group of four companies –Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. and Google of Alphabet Inc.– are the largest buyers of Nvidia and have represented around 40% of sales.
Huang, 61, is trying to expand his bets by producing complete computers, software and services, with the goal of helping more corporations and government agencies deploy their own information systems. AI.
The data center division of Nvidia – now by far its largest source of sales – generated $22.6 billion in revenue last quarter. Gaming chips brought in $2.6 billion. Analysts had set targets of $21 billion for the data center unit and $2.6 billion for the gaming unit.
The company stressed Wednesday that it wants to sell its technology to a broader market, beyond the giant cloud computing providers known as hyperscalers. Huang said that AI is targeting consumer internet companies, automakers, biotech and healthcare clients. Countries are also developing their own systems, a trend known as sovereign AI.
These opportunities are creating multiple multibillion-dollar markets beyond cloud service providers, he said.
Large-scale deployment of chips Nvidia by Tesla Inc. of Elon Musk It is a sign of that expansion. The automaker is using equipment from the manufacturer to develop software that will operate self-driving vehicles.
Still, hyperscalers remained a critical growth driver for Nvidia last quarter. They generated approximately 45% of the company’s data center revenue. This suggests that the company is in the early phases of business diversification.
The technology giant’s new chip platform, called Blackwell, is already in full production, according to Huang. And lays the foundation for a Generative AI capable of handling billions of parameters. “We are ready for our next wave of growth,” he said.
According to Huang, the company will get “a large part” of its 2024 revenue from the new chips Blackwell. But customers are not reducing orders for their current products, which worries some analysts. Those buyers need the current generation to build their infrastructure as soon as possible, he said.
The demand for products Nvidia has been outbid, and Huang expects it to continue to be that way next year. The company also faces other challenges: The increasing complexity of its technology, which now includes entire computer systems, means its supply chain has become much more complicated, he said. This makes it difficult to increase production.
“No one has ever mass-produced supercomputers,” he said in the interview. “We do the best we can,” she concluded.
(c) 2024, Bloomberg
