Nvidia gives lacklustre forecast, stoking fears of AI slowdown

SAN FRANCISCO – Nvidia, the world’s most valuable publicly traded company, gave a tepid revenue forecast for the current period, fuelling concerns that a massive run-up in artificial intelligence (AI) spending is slowing.

Sales will be roughly US$54 billion (S$69.4 billion) in the fiscal third quarter, which runs till end-October, the company said in a statement on Aug 27. Although this is in line with the average Wall Street estimate, some analysts have projected more than US$60 billion.

The forecast excluded data centre revenue from China, a market where Nvidia has struggled with US export restrictions and opposing pressure from Beijing.

The company’s tepid outlook adds to concern that the pace of investment in AI systems is unsustainable.

Difficulties in China have also clouded Nvidia’s business. Though the Trump administration recently eased restrictions on exports of some AI chips to that country, the reprieve has not yet translated into a rebound in revenue. 

Nvidia shares fell about 4 per cent in extended trading on Aug 27 following the announcement. They had rallied 35 per cent in 2025 as at the close, lifting the company’s market capitalisation above US$4 trillion.

Nvidia is still dealing with the fallout from a growing US-China rivalry, where semiconductor technology has become a major flashpoint.

In April, the Trump administration tightened restrictions on exports of data centre processors to Chinese customers, effectively shutting Nvidia out of the market. Washington subsequently rolled that back, saying that the US will allow some shipments in return for a 15 per cent slice of the revenue. 

At the same time, Beijing has encouraged a move away from using US technology in AI systems accessed by the Chinese government.

The shifting policies have made it difficult for Wall Street to predict how much revenue Nvidia might be able to recover in the market. Some analysts have made projections in the billions of dollars, while others have refused to predict any China sales until the company makes the situation clearer.

Heading into the earnings report, Nvidia analysts had a roughly US$15 billion gap between their highest and lowest estimates for third-quarter revenue – one of the largest such ranges in the history of the company.

Under co-founder and chief executive officer Jensen Huang, the 32-year-old chipmaker has suddenly become the biggest success story in the technology industry. Throughout most of its history, Nvidia lived in the shadow of larger rivals such as Intel, carving out a modest living selling graphics processors to computer gamers.

Nvidia’s big breakthrough came when it adapted its graphics processing units, or GPUs, to run AI software – creating something that Mr Huang calls accelerated computing.

As recently as 2022, Nvidia was a fraction of Intel’s size and booking less revenue in a year than it now pulls in a quarter. These days, Nvidia is on course for annual sales of US$200 billion – with the number estimated to eclipse US$300 billion by 2028. This would give the company about a third of the chip industry’s total revenue. 

But Nvidia is largely dependent on the spending plans of just a few companies. Microsoft, Amazon.com and other giant data centre operators account for about half of its sales. To diversify the business, Mr Huang is pushing into new markets and providing a wider range of products. This includes offering complete computers, networking gear, software and services.

He is determined to accelerate the adoption of AI across the economy, and he pushes his team to produce new hardware and software at a frenetic pace. 

For now, the company is largely unchallenged in the market for its AI chips, known as accelerators. In-house efforts by companies such as Amazon.com and early-stage challenges from would-be rivals such as Advanced Micro Devices have not yet made a significant dent in its market share.

But it faces other headaches. Aside from Nvidia’s struggles in China, the biggest impediment to growth has been the availability of supply. Like most chipmakers, Nvidia does not own factories and relies on outsourced production, chiefly from Taiwan Semiconductor Manufacturing Company. Ramping up production of new technology remains an ongoing challenge. BLOOMBERG