Nvidia says growth will continue as AI reaches the 'tipping point'
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.