Nvidia has revealed its revenue shot up by 262 per cent in the recent quarter, thanks to an unprecedented surge in artificial intelligence chip sales. The increased revenue far surpassed optimistic estimations and CEO Jensen Huang confirmed that this upward trajectory is anticipated to persist into the new year, with the introduction of Blackwell – a new series of chips.
Huang outlined to investors how the new Blackwell chips should reap substantial revenue, capitalising on the burgeoning demand for the computational capabilities that underpin generative AI technology. The CEO expressed his belief that Blackwell will foster a new phase of growth and Nvidia’s commitment to consistently developing and releasing more advanced chips. According to Huang, the company is operating on an annual rhythm where the Blackwell chip will be succeeded by another chip.
In the past year, the demand for Nvidia’s AI data centre Graphics Processing Units (GPUs) has had a massive increase as major tech companies like Google, Microsoft, Meta and Amazon have all hinted at maintaining significant spending till at least 2024 to develop necessary computing infrastructure for providing new AI products on a large scale.
For the three months ending April, revenue stood at $26 billion (€24 billion), as compared to the forecasted $24.7 billion. There was a striking increase in year-on-year revenue, approximating last quarter, when growth touched 265 per cent. Nvidia predicts revenue to be about $28 billion (with a leeway of 2 percent) for the current quarter which is above the consensus estimate of $26.8 billion.
The data centre revenue of Nvidia, associated with its sought-after AI chips, witnessed a 427 per cent rise year on year, making a total of $22.6 billion for this quarter, Nvidia CFO, Colette Kress announced. The increase can be attributed to substantial demand for the current-generation Hopper GPUs. The company expects to commence shipping the Blackwell chip this quarter.
The shares of Nvidia, that have seen a staggering 90 per cent growth since the year’s beginning, rose by nearly 6 per cent in after-hours trading. The chip manufacturer also declared a 10-for-1 stock split valid from 7th of June and announced an increment of 150 per cent in its quarterly cash dividend.
Prior to the disclosure of financial outcomes, market actors anticipated significant fluctuations in both Nvidia’s stock and the wider investment sphere. Nvidia’s extraordinary market ascendance, escalating its market worth over six times to $2.3 trillion since 2023, has resulted in it being the third highest valued US company, surpassing Alphabet, Google’s parent, and Amazon. Due to its extensive climb, the stock of Nvidia attracts intense scrutiny from Wall Street.
To exploit and maintain pace with the surge in demand for Artificial Intelligence (AI), Nvidia has been swiftly advancing. Its Blackwell chips, unveiled in March, reportedly have twice the potency compared with the current-gen chips for training AI models, and execute queries five times faster – a feature known as “inference”. Strikingly, Nvidia had released its last GPU chip model, Hopper, merely a year earlier.
Analysts had expressed scepticism whether the shift to a new product range could potentially disrupt Nvidia’s significant quarter-on-quarter progress, indicating a possible temporary drop in demand. For instance, the expedited launch of Nvidia’s chips influenced Amazon’s decision to amend its original plan of ordering the former generation of chips and replace them with the Blackwell series.
However, Huang, Nvidia’s CEO, was able to alleviate investor concerns, asserting the demand for both Hopper and Blackwell surpassed its supply and was likely to persist into the following year. The diluted earnings per share were reported to be $5.98, marking a rise of over 600% from the prior year. Furthermore, the gross margin was slightly above the projected figure at 78.4%, with the net income being $14.9 billion, exceeding the expectation of $13.2 billion.
Simultaneously, other market players like AMD and Intel have been introducing their versions of AI data centre chips, rivalling Nvidia’s. In addition, they have been teaming up with clients of Nvidia to present alternatives to its dominant software platform, Cuda. However, the first quarter’s performance and moderate future forecasting from Intel and AMD didn’t reflect any major gains from the surge in demand. Meanwhile, Microsoft confirmed it would employ AMD’s new MI300X accelerator chips and its ROCm software for managing high-demand AI workloads on its Azure cloud service.
“Nvidia’s earnings surpassed expectations in all areas, particularly in data centre revenue,” commented Daniel Newman, CEO of The Futurum Group. “Financial markets eagerly anticipated these figures, and Nvidia didn’t disappoint.”
Newman also suggested that the potential stock split would make shares more attainable and could generate further enthusiasm for Nvidia’s stock. He added, “The AI market is still thriving,” This information is courtesy of The Financial Times Limited 2024.