Nvidia shares rise as sales forecast on AI optimism

(Bloomberg) — Shares of Nvidia Corp., the chipmaker at the center of artificial intelligence development, rose on Thursday after a positive sales forecast showed that AI computing spending was strong.

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The company said Wednesday that second-quarter revenue would be about $28 billion, beating analysts’ forecast of $26.8 billion. Results for the fiscal first quarter ended April 28 beat forecasts — boosted by growth in Nvidia’s data center division.

A key question heading into the earnings report was whether Nvidia’s latest numbers could justify the dizzying run-up in its stock. Shares are up 92% this year by Wednesday’s close, buoyed by investor confidence that the company will continue to beat expectations.

The report did not disappoint, and CEO Jensen Huang stoked the excitement by talking about 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. “It’s very exciting.”

Shares rose 10% to $1,047.27 on Thursday, adding about $240 billion to Nvidia’s valuation. Intel Corp., the chipmaker that once dwarfed Nvidia in every measure. This is much more than the total market capitalization of And Nvidia’s $28 billion in quarterly sales will be more than twice what Intel is expected to report.

The Santa Clara, California-based company also announced a 10-for-1 stock split and raised its quarterly dividend by 150% to 10 cents. The rally also helped lift stocks of other AI-related companies. Super Micro Computer Inc., Advanced Micro Devices Inc. and Dell Technologies Inc. All have profited after results.

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The upbeat outlook reinforces Nvidia’s position as the biggest beneficiary of AI spending. The company’s so-called AI accelerators — chips that help data centers build chatbots and other sophisticated tools — have become a hot commodity in the past two years, boosting its sales. Nvidia’s market valuation also rose to $2.3 trillion.

In the fiscal first quarter, Nvidia’s revenue more than tripled to $26 billion. Excluding certain items, earnings per share were $6.12. Analysts had forecast sales of about $24.7 billion and earnings per share of $5.65.

Huang, in his signature black leather jacket, has become a celebrity in the AI ​​era. His company, which he co-founded in 1993, began as a supplier of graphics cards for computer gamers. But he recognized that Nvidia’s chips were well-suited to building AI software, and it helped open up a new market — and gave him an edge over competitors.

The release of OpenAI’s ChatGPT chatbot in 2022 sparked a race between major tech companies to build their own AI infrastructure. This struggle made Nvidia’s H100 accelerators a must-have product. They sell for tens of thousands of dollars per chip and are often in short supply.

For now, most of this new revenue comes from a handful of customers. A group of four companies — Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. and Alphabet Inc. Google is Nvidia’s largest buyer and accounts for 40% of sales. Huang, 61, is trying to spread the word by making complete computers, software and services — aimed at helping more companies and government agencies deploy their own AI systems.

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Nvidia’s data center division — now its biggest source of sales — generated $22.6 billion in revenue last quarter. Gaming chips contributed $2.6 billion. Analysts gave targets of $21 billion for the data-center unit and $2.6 billion for gaming.

Nvidia emphasized Wednesday that it wants to sell its technology to a broader market — expanding beyond giant cloud-computing providers known as hyperscalers. AI is moving to consumer internet companies, carmakers, biotechnology and health care customers, Huang said. Countries are also developing their own systems – referred to as sovereign AI.

These opportunities extend beyond cloud service providers to create multibillion-dollar markets, he said.

One sign of that expansion is the large-scale deployment of Nvidia chips by Elon Musk’s Tesla Inc. The automaker uses Nvidia Gear to develop software that powers self-driving vehicles.

However, hyperscalers were an important growth driver for Nvidia last quarter. They generated approximately 45% of the company’s data center revenue. This suggests that Nvidia is in the early stages of diversifying its business.

The company’s new chip platform, Blackwell, is now in full production, Huang said. And it lays the groundwork for generative AI that can handle trillions of parameters. “We’re ready for the next wave of our growth,” he said.

The company will get “a lot” of its 2024 revenue from the new Blackwell chips, Huang said. But customers haven’t eased orders for its existing products — a concern among some analysts. Current Generation should help those buyers quickly build their infrastructure, he said.

Demand for Nvidia’s products is outstripping supply, and Huang expects it to remain so until next year. The company is grappling with other challenges: The increasing complexity of its technology, which now includes complete computer systems, has made its supply chain more complex, he said. This makes it difficult to increase output.

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“No one has ever produced supercomputers in volume,” he said in the interview. “We’re doing the best we can.”

(The fifth column updates the stock. An earlier version of the story corrected the year-to-date stock increase.)

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