It’s not a household name yet, but anyone who follows the stock market knows at least something about Nvidia.

The company is the wonder of the year, a stock by which all others are measured. Nvidia designs the chips that make artificial intelligence work, and with AI being hailed as the most important technological development since the internet, Nvidia’s shares have soared since last year.

I’m not qualified to judge how important – or how dangerous – AI will ever become, but I am paying close attention to the stock market, which values ​​Nvidia at more than $2.2 trillion, making it the third-largest publicly traded company in the world world is. world behind Microsoft and Apple.

The enthusiasm for AI is boosting the stock prices not only of Nvidia, but also of many other tech companies believed to be aware of the technology’s potential, including Microsoft, Meta and Alphabet, as well as other chipmakers such as AMD, Taiwan Semiconductor and Intel .

But the blistering pace of Nvidia’s profits — up about 290 percent over the past twelve months — has me and many Wall Street analysts wondering how sustainable this run is. The answer has implications for the entire market.

There are many ways to investigate this, including traditional stock analysis, which takes into account revenue, earnings, cash flow, business growth and momentum. I took an unusual approach: I asked several AI chatbots about Nvidia’s prospects as a stock. Specifically, I asked how large Nvidia’s market value would be in ten years if the company’s stock price maintained its current pace.

What they told me boiled down to this: the sharp rise in Nvidia stock cannot continue for long. And with much of the stock market embroiled in the same feverish AI-driven stock frenzy, the message is broadly true. If the market doesn’t slow down soon, it could inflate itself into a bubble – and eventually all bubbles will burst.

On a personal level, I love new technology, but I try not to get too excited about it until I’m sure it works safely and reliably. As far as I know, AI produces spectacular visuals and is fun to play with, but it is neither reliable nor safe (yet).

(The New York Times sued OpenAI and Microsoft in December for copyright infringement of news content related to AI systems.)

What’s in a billiard?

To their credit, all three AI chatbots I asked – Microsoft Copilotpowered by OpenAI’s Chat GPT-4; Google Gemini; And Claude 3 from Anthropic – were hesitant to answer my questions directly.

All said they could not reliably assess stock valuations or predict with the slightest accuracy how a stock or the overall market would perform in the future. I wish stock analysts said that too.

Just because Nvidia’s stock price is growing rapidly now doesn’t mean it will continue to grow rapidly, especially over periods as long as ten years, they all warned me.

But I still forced them to do some basic calculations, which I supported with 20th century technology: a spreadsheet and a calculator.

The chatbots didn’t arrive at the same numbers every time and never agreed on the details. That’s another sign, in my humble opinion, that they’re not ready for prime time. I wouldn’t use them for math homework.

But in this case, the details didn’t really matter. Ultimately, and with considerable prodding, they all came to the same basic conclusion: the simple laws of compound arithmetic tell us that if the company’s stock price continues to rise at its current rate, Nvidia will end up with a market cap in the trillions of dollars. dollars.

Quadrillions are an order of magnitude that I’m not comfortable with, so I resorted to a dictionary: One trillion dollars that is 1 with 15 zeros after it, or a thousand trillion dollars in American parlance. (In British English, a quadrillion is even bigger: 1 with 24 zeros. I’m using the American definition.)

How big is that? The global economy – the combined size of all annual gross domestic products of every country in the world – reached $100.88 trillion in 2022, according to the World Bank. So if Nvidia continued to grow at its current annual rate, the output of the entire known economic universe would shrink within a decade.

Claude 3, the Anthropic AI chatbot, calculated that Nvidia, at its current growth rate, would become a $2.76962 trillion company within ten years, then warned me: “This is an extremely large number that actually seems unlikely, because Nvidia is many times larger than the entire global economy.”

In plain English, Nvidia’s astonishing growth over the past year is far too high to continue for long. I would be wary of buying shares of Nvidia, or any other stock, in the belief that its momentum is perpetual. What goes up can come down, and somewhere down the road it certainly will.

This warning reinforces what traditional valuation measures show. Nvidia’s stock price, and the prices of many stocks, are high. They can be justified by assuming that their sales and revenues will grow at a breakneck pace. But if stock prices rise faster than profits, the market will eventually crash.

Do you remember Apple?

Nvidia is an impressive company. The company’s products are well-reputed, in high demand, and generating huge, fast-growing profits.

February’s latest earnings report, which unleashed enormous optimism in the stock market, contained eye-popping numbers. And in a call with Wall Street analysts, Nvidia CEO Jensen Huang gave Wall Street something exciting to think about. The company’s technology lays the foundation for a new industrial revolution, he said.

“We are now at the dawn of a new industry in which AI-specific data centers process massive raw data and refine it into digital intelligence,” he said. “Like AC power generation factories of the last industrial revolution, Nvidia AI supercomputers are essentially AI generation factories of this industrial revolution.”

The sky is the limit for the coming years, he suggested.

But Nvidia will inevitably grow more slowly. It is absurd to think that it can become bigger than anything else in the universe.

But it can still grow quickly. Some companies have previously succeeded in sustaining rapid long-term growth.

At various stages since its founding in 1976, Apple has baffled skeptics, who regularly said the company had become too big to continue growing rapidly. For example, in 2012, Apple’s market capitalization was $500 billion and its stock price had risen 68 percent in just eight months.

At the time, The New York Times quoted an analyst who used a spreadsheet, not a chatbot, to assess Apple’s prospects. The analyst concluded that if the company grew at just 20 percent per year over the next decade — much slower than its 2012 growth rate — Apple would be worth an impossible number by 2022: more than $3 trillion. That number doesn’t look strange now.

Apple’s market cap hasn’t quite reached it yet, but it’s close, at about $2.7 trillion. Its old rival, Microsoft, which was much smaller than Apple in 2012, now has a market capitalization of more than $3 trillion. These two giants have risen and fallen many times and show every prospect of being able to do so again.

I don’t know if Nvidia belongs in that lofty category, but it’s clear that while Nvidia won’t be bigger than the entire universe, it could be significantly more valuable in the next ten to twenty years. But maybe not.

It might look more like Cisco Systems, the most valuable company on the stock market in March 2000. That was the height of a new technology boom: the dot-com bubble. Cisco is still a solid company. The products form the backbone of the internet. But its market cap in 2000 was $567 billion. Now it is about $200 billion.

It will be fascinating to see how Nvidia’s fate unfolds. But because I can’t predict how the company, or any company, will fare in the long run, I don’t buy individual stocks – not Nvidia, Apple, Microsoft, Cisco or whatever.

Instead, I settle for broad, low-cost index funds that track the entire market. They are a passive and less risky bet on the future that does not require stock selection.

If Nvidia grows rapidly in the coming years, I won’t miss this entirely, as the stock market will likely grow as well. If Nvidia fails, other stocks will likely lose out at some point. At least that’s what happened over the past hundred years. The AI ​​boom is a thrill ride. If things start to slow down, those who hedged their bets will be glad they did.

Stocks on Wall Street posted their biggest gain in more than a year on Thursday, a day after Nvidia, which has become an emblem of the growth potential offered by artificial intelligence, reported record profits.

The S&P 500 rose 2.1 percent, its best single-day performance since January 2023. The Nasdaq Composite index, packed with tech stocks like Nvidia, rose 3 percent, also the biggest single-day jump in more than a year.

After markets closed on Wednesday, Nvidia, which designs microchips used in the development of artificial intelligence, reported record revenue of more than $22 billion for the last three months of 2023. These figures exceeded analyst expectations and fueled a global stock rally .

Japan’s Nikkei 225 index rose to a new high, breaking the previous peak reached in early 1990. Stock markets in China, Germany, France and Britain all ended the day higher.

Nvidia’s surprising financial performance confirmed a rapid growth period for the company, which benefited from the emerging exuberance about AI. Revenues increased by more than 250 percent compared to the same period in 2022.

The company rose about 16 percent on Thursday, making it the best-performing stock in the S&P 500. Over the past twelve months, its share price has risen 275 percent, increasing its market value to approximately $1.5 trillion and making it one of the most profitable stocks. highly regarded companies in the world.

That size also means the company has a major impact on the indexes it is part of, with Nvidia’s share price rise on Thursday responsible for almost a third of the S&P’s rise.

Other chip makers also enjoyed a sharp rise in their stock prices, with Advanced Micro Devices up about 11 percent and Applied Materials up 5 percent.

In 2002, after the dot-com bubble burst and Sun Microsystems swooned, company co-founder Scott McNealy highlighted the folly of Wall Street analysts who favored one financial metric to gauge a stock's value: its price in relation to the company's sales.

Mr. McNealy mused on the price-to-sales ratio – a key measure of a company's value relative to the amount of money it generates. A high ratio may be justified if investors believe a company has room to grow; a low ratio usually indicates that investors believe the company is accurately valued.

Based on that measure, analysts had guessed that Sun's stock was undervalued, even if its price was more than 10 times its revenue — a value the company ultimately wouldn't be able to sustain. Even if Sun had passed on every dollar it made at the time to investors, it would have taken them ten years to recoup their investment.

“Do you realize how ridiculous those principles are?” Mr. McNealy told Businessweek. “You don't need transparency. You don't need footnotes. What did you think?”

Today's stock market is creating a similar sentiment among some investors, led by giant chipmaker Nvidia, the poster child for the artificial intelligence exuberance. On Wednesday, Nvidia's share price closed at 27 times sales.

Nvidia is very different from the hundreds of revenue-rich but profitable companies that the market welcomed in the late 1990s. The Santa Clara, California-based company is wildly profitable: In the last three months of 2023, it generated more than $22 billion in revenue, up 22 percent from the previous quarter and more than 250 percent higher than a year earlier.

But does Nvidia have enough room to grow to justify such a high price-to-sales figure, or is it magical thinking on the part of over-enthusiastic investors? Experts are divided.

The high price-to-sales ratio is rooted in the firm belief of many Nvidia enthusiasts that the company will continue to grow because of its crucial role in artificial intelligence. Even if a ratio of 27 times sales implies a large growth expectation for the company, many investors still view Nvidia as undervalued because they expect it to continue to generate more and more money – until eventually the price-to-sales ratio shrinks to the level of a more sedate, corporate behemoth.

That has already started to happen. Before reporting new earnings on Wednesday, the company was trading at a ratio closer to 30 times its revenue. In June it was above 45.

“The numbers have gotten so big so quickly,” said Stacy Rasgon, an analyst at AB Bernstein who covers Nvidia. Mr. Rasgon still expects Nvidia's value to be “materially higher” in five to 10 years.

But Nvidia isn't the only company making waves, even if it is the most high-profile. Microsoft, Advanced Micro Devices and Broadcom are among the companies that have seen their prices rise above tenfold of sales in the past year, as beneficiaries of the general excitement around AI

For some investors, uncertainty about whether the bet will succeed makes the high price of stocks like Nvidia uncomfortable, especially when there is a lack of clarity about the path of inflation and interest rates, as well as political uncertainty from Ukraine, China, the Middle East and at home in the run-up to the presidential elections.

“What kind of return do you actually get if you take all that risk?” said Matt Smith, investment director at Ruffer, a London-based fund manager.

Another popular measure, the price-to-earnings ratio, shows that the S&P 500 now trades almost 23 times the collective earnings of the companies in the index. Putting aside the pandemonium surrounding the pandemic, the last time the ratio was this high was just before the market stalled in 2018. Before that, it was when the dotcom bubble burst.

For stock prices to continue rising from here, earnings must continue to grow, otherwise these stock picker-favored metrics must rise even further above their historical norms.

“Valuations are already historically rich,” said Jordon Brooks, co-head of the macro strategies group at trading firm AQR. “And then we would be talking about a dramatic expansion of these areas from here.”

However, relying on snapshot statistics oversimplifies whether a stock still offers value for money, says Aswath Damodaran, professor of finance at New York University's Stern School of Business, where he teaches stock valuation.

Amazon was trading at a stock price of more than 40 times sales in January 1999. Since then, the share price has risen by an average of 15 percent annually. Revenues have grown even faster. Today, its stock is priced at just three times its revenue, and it has been one of the best investments in the S&P 500 over the past two decades.

Nvidia could be the next Amazon and meet investors' growth expectations. Or it could be more like the dozens of computer companies that came to prominence in the 1980s but didn't last until the new millennium.

In 1982, Commodore International sold the second most popular personal computer: the Commodore 64. By early 1985, it had lost its competitive advantage and its stock price had fallen from over $100 to less than $20. Less than a decade later, the company went bankrupt.

“People said PCs would take over the world,” Mr Damodaran said. “They were right. But where they got it wrong was that all the companies that made PCs in the 1980s didn't make it.”

The same will likely be true for many of the companies swept up in the AI ​​boom, he added.

Even when it comes to broad indexes like the S&P 500, simple numbers don't tell the whole story. Remove the so-called Magnificent Seven stocks, like Nvidia, whose size has had a big impact on the S&P 500's overall performance, and the index looks much more modestly priced compared to its past performance.

Choosing the Amazons and avoiding the Commodores is still not easy.

Such analysis is inherently based on assumptions about the future: a company's future profitability, its future competitors, and even the future of the world in which it will exist. That uncertainty helps explain the divergent expectations among Wall Street analysts, with the most pessimistic seeing Nvidia's true share value closer to $400, not Wednesday's closing price of $674, while others think the price should be above $1,000.

Mr Damodaran sees such high expectations as “unrealistic”.

“It's the nature of the beast,” he says. “We think we can do more than we can. When a big change is coming, we overestimate.”

Nvidia, the kingpin of chips powering artificial intelligence, released quarterly financial results on Wednesday that showed another scorching growth and said the gains would continue, underscoring how it has become one of the world's most valuable companies.

Nvidia is one of the most visible winners of the AI ​​boom and one of the tech stocks, known as the “Magnificent Seven,” that have helped drive the stock market. Investors have been betting heavily on continued demand for specialized, expensive semiconductors, which are used to train popular AI services like OpenAI's ChatGPT chatbot.

Nvidia's valuation has risen more than 40 percent since the start of the year to $1.7 trillion, recently eclipsing the market values ​​of Amazon and Alphabet before retreating to the fifth most valuable tech company.

The company's stock market gains have largely come from repeatedly beating analysts' growth expectations, a feat that becomes increasingly difficult as they continue to raise their forecasts.

Nvidia reported that fourth-quarter fiscal revenue more than tripled from a year earlier to $22.1 billion, while profit rose nearly tenfold to $12.3 billion.

The turnover came in above the $20 billion the company had forecast in November, although lower than some analyst estimates that had recently risen to as much as $23 billion.

Nvidia forecast current quarter revenue would be about $24 billion, also more than triple the year-ago period and higher than the average analyst forecast of $22 billion. The company's shares rose in after-hours trading.

Jensen Huang, co-founder and CEO of Nvidia, says a game-changing shift toward upgrading data centers with chips needed to train powerful AI models is still in its early stages. It will cost about $2 trillion to equip all buildings and computers with chips like Nvidia's, he predicts.

“Accelerated computing and generative AI have reached the tipping point,” Mr. Huang said in a press release. “Demand is increasing across companies, industries and countries worldwide.”

One factor driving Nvidia's latest sales growth is the ability of the company's manufacturing partners, led by Taiwan Semiconductor Manufacturing Company, to increase supply of Nvidia's flagship AI chip, which commands prices ranging from $15,000 to $40,000.

But giant cloud computing companies like Amazon, Google and Microsoft are designing their own AI chips to run alongside Nvidia's, and rival chipmakers continue to introduce their own AI products.

Intel, which has long dominated the industry for standard microprocessor chips but has lagged behind in AI, gathered a range of partners and potential customers in Silicon Valley on Wednesday to discuss its plans to offer manufacturing services that will expand the industry's capacity to build AI chips could increase. Attendees included Sam Altman, who as CEO of OpenAI is heavily dependent on Nvidia chips.

“Intel was once the evil guarantor of the industry,” said Daniel Newman, CEO of Futurum Research, which tracks the semiconductor industry. Now, he said, “companies are coming together to make sure Nvidia doesn't become too much more powerful.”

The Biden administration has thrown up another series of hurdles for Nvidia and other U.S. chipmakers, imposing restrictions on their chip sales in China. Nvidia has responded by selling less powerful versions of some products on the market.

Investors brace for 'fireworks'

Chip giant Nvidia's share price has risen steadily over the past year and a half, driven by investors' hopes that artificial intelligence is a truly transformative technology – And through their hopes that the company's high-performance semiconductors will continue to power that technology.

But in recent days the company became the third most valuable publicly traded company in the US, before falling to fifth place. The shares will face another big test on Wednesday when Nvidia reports its latest quarterly results, with billions in investor capital at stake.

Brace yourself for a big step. After the price more than doubled since May due to soaring demand for Nvidia chips, investors are wondering if the peak is close to being reached. Opinions on Wall Street seem divided: Bloomberg reports that options traders have been looking into both put options, whose value rises when the price of a share falls, and call options. That means Nvidia's market cap could do that will increase by approximately $180 billion on Wednesday.

These bets “suggest that the post-results price increase will be 10.5 percent in either direction, so watch for possible fireworks in either direction,” Jim Reid, a strategist at Deutsche Bank, wrote to investors on Wednesday.

That is after Tuesday's drop in Nvidia shares wiped out $78 billion in market value. It's worth remembering that Nvidia has become one of the largest components of the S&P 500, making it one of the most widely distributed stocks. That dip helped push the index into the red on Tuesday, demonstrating Nvidia's market-moving power.

What to pay attention to: Analysts have made a prediction that Nvidia's fourth-quarter revenue more than tripled year-over-year, and its net profit for the year rose roughly sevenfold, thanks to the company's booming data center business and robust demand for its chips.

Investors will also be paying attention to the outlook for the coming year, given how Nvidia has become entangled in trade tensions between Washington and Beijing. China was one of the company's fastest growing markets, but it is now banned from selling its best chips there. Chinese rivals are seen as fast bridging the gap between their wares and those of Nvidia; Internal AI chips are also being built by Amazon, Google, Meta and Microsoft.

• The market is also focused on the minutes of the Fed's latest meeting: Traders have scaled back their bets on rate cuts after last week's warmer-than-expected inflation data, and Wednesday's release could provide new insight into when the central bank might can start lowering interest rates. financing costs.

HERE'S WHAT'S HAPPENING

President Biden's campaign is outpacing Donald Trump's. Biden's reelection effort had $56 million in cash at the end of January, compared to about $30 million for the Trump campaign. That reflects both Democratic donors who appear to be uniting behind the president and Trump growing legal costs. Separately, New York Attorney General Letitia James said she would consider doing so seize Trump's assets if he is unable to pay a $354 million judgment in the civil fraud case she filed against him.

The FTC and the states are reportedly planning to file a lawsuit to block Kroger's acquisition of Albertsons. The agency and attorneys general are preparing for this disputes the $24.6 billion supermarket deal As soon as next week, according to Bloomberg. Their expected lawsuit would allege that a deal would lower workers' wages and raise costs for consumers.

HSBC's profits plummet after a $3 billion charge in China. Fourth quarter profit up Europe's largest bank fell by 80 percent after a write-down on its stake in the Bank of Communications and a $2 billion hit on the sale of its French retail operations. Shares of HSBC fell on Wednesday on concerns that the slowdown in China, one of HSBC's biggest markets, could hurt its business.

Harvard is trying to contain a new controversy over anti-Semitism. The university's interim president, Alan Garber, condemned a social media post spread by two student organizations and a faculty organization with what he called “despicable and hateful anti-Semitic tropes.” The groups later disavowed the cartoon, but the episode is the latest controversy at Harvard following the October 7 Hamas-led attacks on Israel.

Enemies are coming out strongly against Capital One's big deal

Capital One's $35.3 billion deal to buy Discover Financial was always going to be difficult to get past financial regulators because it would lead to the creation of a new credit card giant.

Public opposition to the transaction already appears strong, as consumer interests worry about combining two major lenders.

The companies' CEOs acknowledged that regulators could be skeptical. During an analyst call on Tuesday, Richard Fairbank, the head of Capital One, hinted that he would become a stronger competitor to both the larger banks and Visa and Mastercard, the nation's largest payment network operators:

• “The increased scale and reach of our combined franchise will position us to compete more effectively with some of the largest banks and payments companies in the United States.”

• “There are only two vertically integrated U.S. payment networks, American Express and Discover, and they compete with Visa and Mastercard, which are obviously much larger.”

Worth noting: a combined Capital One and Discover JPMorgan Chase would surpass By one estimate, it is the country's largest credit card issuer, and the lender is expected to move some of those cards to Discover's payment network.

Otherwise, Fairbank had little say in potential problems. He told analysts: “We believe we are well positioned for approval, but we obviously cannot discuss our discussions with our regulators. Naturally, we kept them informed throughout the process.”

Critics of the deal did not seem reassured by Capital One's argumentspointing to data points such as a recent report from the Consumer Financial Protection Bureau, which found that larger issuers (such as Capital One) charge borrowers more than smaller rivals.

• “This Wall Street deal is dangerous and will hurt working people,” Senator Elizabeth WarrenDemocrat of Massachusetts, posted Tuesday on the social network X. “Regulators should block this immediately.”

• “Capital One has a pattern of making deals that benefit the bank but not its customers and communities.” Jesse Van Tolthe CEO of the National Community Reinvestment Coalition said in a statement.

The Justice Department has not said anything publicly and will not be the main regulator looking at the Capital One deal (but will be able to weigh in). Still, bank watchers have pointed out to DealBook one speech last year by Jonathan Kanterthe department's antitrust chief, calls competition between banks “vital” and says reviewing such deals requires recognizing “modern market realities.”

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DEI in the headlights

The fate of corporate diversity efforts already looked bleak after the Supreme Court last year rejected affirmative action as a factor in admissions to U.S. colleges. Now, a rare action by an appeals court to challenge Nasdaq's attempt to increase board diversity is raising new questions about whether the exchange's initiative can survive.

Nasdaq wants more board diversity data than the law requires. In 2020, the exchange asked the SEC to approve a rule that would require thousands of publicly traded companies to disclose information about the composition of their boards of directors or face delisting. The SEC later approved it.

Two groups challenged the rule in court and lost before a panel of the U.S. Court of Appeals for the Fifth Circuit in October. The plaintiffs included a group founded by Edward Blum, a conservative activist who was also behind another organization that filed the lawsuits that led to the positive Supreme Court ruling.

But the Fifth Circuit agreed Monday to reconsider the challenge en banc, with all judges set to review the case after a hearing scheduled for May. The court has a reputation for being prepared to do this entertain and approve unusual legal theories.

Nasdaq declined to comment, while an SEC spokeswoman said the agency would continue to defend its actions. Blum did not respond to a request for comment.

It is becoming increasingly difficult for companies to understand the changing landscape. Republican attorneys general have done so threatened companies that are adopting diversity initiatives, and companies are struggling to figure out the legality of their programs.

That wariness manifests itself in sometimes unexpected ways: During a webinar on Tuesday hosted by the Aspen Institute Business and Society Program on the future of such initiatives, speakers insisted not to be named or quoted.

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Putting a figure on the impact of strikes

The Department of Labor on Wednesday will release its first measure of the “year of the strike” for corporate America, including disruptive work stoppages by major unions like SAG-AFTRA and the UAW.

But labor experts say the effect will almost certainly be underestimated because the data will not reflect the emerging trend of organizing smaller workplaces.

Smaller strikes are also a big problem. The Labor Action Tracker Research by researchers at Cornell and the University of Illinois Urbana-Champaign shows that there were 470 strikes and lockouts last year, amounting to almost 25 million strike days. The hotel and food industry accounted for the largest share of work stoppages found in the survey, but the smallest share of worker walkouts.

But Wednesday's Labor Department data is likely to understate that impact because it doesn't take into account work stoppages involving fewer than 1,000 workers. This inequality has been exposed before: the Labor Department counted 23 strikes in 2022, while Labor Action counted 433 strikes.

Unions see the need to gain a foothold in smaller workplaces, also at units of larger companies such as Starbucks. “For unions to be successful in representing workers, employment growth in smaller companies requires them to be able to organize these smaller workplaces,” Alex Colvin, dean of Cornell's School of Industrial and Labor Relations, told DealBook.

Changing tactics is another focus of Labor Watchers. The number of one-day strikes is increasing, Colvin said. And the UAW created a ripple effect when it staged plant shutdowns instead of an across-the-board strike, a strategy that kept management in the dark and helped the union focus longer on the Big Three automakers. That helped the country achieve major victories in the negotiations.

A start-up driving the artificial intelligence revolution may be in turmoil, but the semiconductor supplier driving its innovations only seems to be going from strength to strength.

On Tuesday, Nvidia continued its streak of blistering quarterly results, driven by stellar sales of AI applications from chips called graphics processing units, or GPUs. Microsoft is using thousands of those chips to run calculations for OpenAI, the generative AI startup whose CEO, Sam Altman, was fired on Friday and quickly hired by Microsoft to head a new cutting-edge research lab.

Nvidia said revenue for the third quarter ended in October tripled from a year earlier to $18.1 billion, while profit nearly quadrupled to $9.2 billion. The revenue figure was nearly $2 billion higher than the company forecast in August and much higher than analysts expected.

The company’s lofty forecasts since May have pushed its market value above $1 trillion and provide evidence that Nvidia is reaping the biggest financial rewards of any company chasing AI capabilities.

And the breakneck pace shows no signs of slowing as Nvidia ramps up production of a highly sought-after chip, the H100, that has been in short supply. Partly as a result, the company on Tuesday forecast revenue of about $20 billion for the current quarter, well above average analyst estimates of just under $18 billion.

“We have increased supply significantly each quarter this year to meet strong demand, and we expect to continue to do so next year,” Nvidia Chief Financial Officer Colette Kress said on a conference call with analysts.

The company’s growth has exploded despite fierce competition from other major chip makers, a number of start-ups, and the in-house creations of some of its major customers. In the latest development, Microsoft introduced its first two homegrown chips last week, including a processor aimed at AI jobs.

But Nvidia’s decades-long partnership with Microsoft seemed to be growing stronger nonetheless. The two companies announced a deal last week to offer Nvidia’s extensive collection of AI software through Microsoft’s cloud service running on Nvidia GPUs. A massive supercomputer that the companies jointly developed also finished third in a six-monthly ranking of the world’s fastest systems.

Nvidia CEO Jensen Huang praised the relationship between the companies at a Microsoft event and said there is much more innovation to come.

“Generative AI is the most important platform transition in the history of computing,” he says. “It’s bigger than the PC. It’s bigger than mobile. It will be bigger than the internet.”

The move by OpenAI’s board to fire Mr. Altman – followed by Microsoft’s move to hire him – introduces “a level of uncertainty that could temporarily create volatility in the generative AI market, and Nvidia is not immune,” Jacob Bourne, an analyst at Insider Intelligence, wrote in a research note.

But other analysts said the heavy spending by Microsoft and many other companies to buy Nvidia’s GPUs for AI tasks was likely to remain steady.

Mr. Huang said on the call with analysts that countries such as India, Sweden and France have taken steps to build specialized data centers for AI instead of relying on U.S. computing services.

“We see them being built everywhere, in virtually every country,” he said.

One headwind concerns China and the impact of new US export restrictions, which also affect Saudi Arabia and Vietnam. Several Nvidia GPUs, including models it developed for China, can no longer be shipped there without an export license.

Nvidia expects sales to affected countries to fall significantly in the fourth quarter, Ms. Kress said, although the shortfall will be more than offset by strong growth in other regions. The company is working on other chips that could be sold in China under the latest restrictions, she said.

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A few days after an attorney used ChatGPT to write a fabricated case briefing, a group of AI experts released a letter warning of the technology’s “risk of extinction.” But will AI ever be good enough to pose such a threat?

Then FAANG is now MAAAN, with the addition of Nvidia. This is how the GPU company became a trillion dollar behemoth.

Plus: Kevin, Casey and New York Times tech reporter Kate Conger answer tough questions from listeners.

Credits

“Hard Fork” is hosted by Kevin Rose and Casey Newton and produced by Davis Land and Rachel Cohn. The show is edited by Jen Poyant. Engineering by Alyssa Moxley and original music by Dan Powell, Elisheba Ittoop, Marion Lozano, Sophia Lanman and Rowan Niemisto. Fact Check by Caitlin Love.

Special thanks to Paula Szuchman, Pui-Wing Tam, Nell Gallogly, Kate LoPresti and Jeffrey Miranda.

Shares in the chipmaker Nvidia rose more than 20 percent on Thursday after the company delivered an overwhelming quarterly revenue driven by demand for the processors that run artificial intelligence systems.

“We’re seeing incredible orders to retool the world’s data centers,” Nvidia CEO Jensen Huang told analysts on a conference call Wednesday.

Nvidia’s chips are used to power AI systems; demand for the chips soared during the boom in cryptocurrency, whose systems also depend on their processing power. At the close of trading on Wednesday, Nvidia’s market cap reached $755 billion, the fifth highest public rating in the United States. On Thursday, the company approached the trillion-dollar club.

The AI ​​rally has also boosted other chip stocks, including those of AMD, ASML and Taiwan Semiconductor Manufacturing Company. Since the introduction of the ChatGPT chatbot last year, the buzz around AI has intensified, making companies at the forefront of the technology such as Microsoft, Google, and Nvidia a popular choice among investors.

The rise in Nvidia’s shares also propelled the entire market up, with Thursday rising enough to send the S&P 500 stock index up about half a percent.

Shares of Nvidia will more than double in 2023, even as concerns about a burgeoning microchip war between Washington and Beijing hover over the industry.

But analysts disagree on how long the rally will last. Bank of America’s Michael Hartnett called the rise the start of onebaby bubble.” On the other hand, Goldman Sachs researchers said tools built on AI could help bolster the global economy with $7 trillion.

The increased demand for Nvidia’s chips stems from calls for more oversight of AI technology. After meeting with top European Union officials on Wednesday, Alphabet CEO Sundar Pichai promised that Google would work with others to Develop AI services responsibly.

And starting in July, New York will require companies that use AI for job acquisition to inform the candidates a new law that is being closely watched by employment lawyers.

Joe Rennison reporting contributed.