AI chip giant Nvidia smashes forecasts with record quarter but investor concerns persist
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Nvidia reported blockbuster quarterly results but Investors are seeking stronger assurances that booming AI sales are here to stay.
PHOTO: AFP
San Francisco – Nvidia, the dominant maker of artificial intelligence processors, failed to impress investors with its latest sales forecast, signalling that concerns about an overheated AI economy
Though the chipmaker delivered a first-quarter outlook that easily beat the average Wall Street estimate, Nvidia shares fell as much as 1.5 per cent during a conference call with analysts on Feb 25. By evening of the day, the stock was little changed.
It was a stark reminder of the skepticism now surrounding Nvidia
Chief executive officer Jensen Huang pushed back on the concerns during the Feb 25 call, arguing that customers are already making money from their newly acquired computing power. That’s why clients will keep investing at elevated levels, he said.
“You need compute capacity, and that translates directly to growth, and that translates directly to revenues,” Mr Huang said. “I’m confident their cash flows are growing.”
Chief financial officer Colette Kress tried to defuse other concerns raised by analysts, including the spectre of supply constraints. The company has secured enough components to be able to meet growing demand, she said.
It remains a challenge to produce enough of Nvidia’s most advanced chips, she told analysts. But the company’s current Blackwell lineup - and an upcoming successor, called Rubin - will still beat earlier sales projections, Ms Kress said. Nvidia had previously said that the chips would generate US$500 billion by the end of 2026.
“We believe we have inventory and supply commitments in place to address future demand, including shipments extending into calendar 2027,” she said.
Nvidia still faces uncertainty in China, the largest market for chips. The US government has granted licences to ship a small amount of H200 processors to customers there, but Nvidia doesn’t know if the Chinese government will give its approval, Ms Kress said. For now, the company will continue to exclude data centre revenue in China from its forecasts.
The small-scale license provided by the Trump administration requires the chips to go through a US inspection before they can be shipped to customers, Nvidia said. And the processors are subject to a 25 per cent tariff when they come into the United States.
Nvidia is the dominant seller of accelerator chips, processors designed to handle the huge amounts of data needed to create AI models.
Nvidia has branched out into general-purpose processors, networking and full computer systems, giving it an even greater hold on customers.
Fiscal first-quarter revenue will be about US$78 billion, the chipmaker said. Though the average prediction was US$72.8 billion, some analysts had projected numbers approaching US$80 billion, according to data compiled by Bloomberg.
In the fiscal fourth quarter, which ended Jan 25, revenue gained 73 per cent to US$68.1 billion. Profit was US$1.62 a share, excluding certain items. Analysts had predicted US$65.9 billion in sales and US$1.53 a share in earnings.
Nvidia’s data centre unit, which is responsible for its industry-leading AI accelerator and networking products, had revenue of US$62.3 billion in the quarter. That compares with an average analyst estimate of US$60.4 billion.
One cloud is hanging over the tech industry: a shortage of memory chips. Like much of the electronics industry, Nvidia’s products are reliant on a steady supply of these components, which provide short-term storage in everything from smartphones to supercomputers. Constraints have sent memory prices soaring and made it harder to ship as many devices this year.
That crunch has held back the gaming division, and Ms Kress said she doesn’t know whether the problem will ease enough this year to let the business grow.
In any case, data centre chips for AI have become a far bigger focus. Earlier in February, Nvidia announced that Meta Platforms has agreed to deploy “millions” of Nvidia processors over the next few years, tightening an already close relationship between two of the biggest companies in AI.
Nvidia’s main rival, Advanced Micro Devices, announced this week a similar long-term deal with Meta. That chipmaker said the transaction would be worth multiple tens of billions of dollars.
A flurry of such megadeals, aimed at locking down long-term commitments for computing capacity, has been offered by the chipmakers as evidence that the AI economy is strong.
But the cozy nature of these transactions - with suppliers and customers sometimes taking financial stakes in one another - has drawn criticism about circular deals potentially inflating demand. BLOOMBERG
