Nvidia far exceeded expectations with its quarterly revenue forecast on Wednesday as an artificial-intelligence boom fueled demand for its chips and said it could buy back $25 billion in stock, sending its shares soaring after hours.
Nvidia’s forecast beat expectations by billions of dollars, demonstrating that a boom in generative AI technologies that may read and write in human-like ways – and powered almost exclusively by Nvidia’s chips – shows no signs of slowing down.
Nvidia’s additional $25 billion in share repurchases announced on Wednesday come as shares have already tripled this yr, making the company the first ever trillion-dollar chip business as investors bet Nvidia can be the key beneficiary of the AI boom.
Analysts have estimated that demand for Nvidia’s prized AI chips is exceeding supply by not less than 50%, adding that the imbalance will stay in place for the next several quarters.
“Corporations worldwide are transitioning from general-purpose to accelerated computing and generative AI,” Jensen Huang, Nvidia’s chief executive, said in a press release.
Shares of Santa-Clara, California-based Nvidia rose 9.6% in trading after the bell, hitting an all-time high.
Nvidia’s report lifted the shares of other Big Tech stocks and AI-related firms, with Microsoft jumping 1.9%, Meta Platforms up 2.1% and Palantir Technologies surging 4.6% in prolonged trading on Wednesday.
Nvidia’s results were a “‘drop the mic’ moment in our opinion that can have a ripple impact for the tech space for the remainder of the yr,” said Daniel Ives, analyst at Wedbush Securities.
From AI startups to major cloud services providers like Microsoft, all wish to get their hands on more Nvidia chips. Demand from China can be in overdrive, as firms there are placing rush orders to stockpile chips before any further US export curbs come into motion.
Should the US place additional export restrictions on AI chip sales to China, it could haven’t any immediate impact on the company’s results, finance chief Colette Kress told analysts on a conference call. Such controls would “lead to a everlasting lack of a possibility for the US industry to compete and lead in one in all the world’s largest markets.”
The corporate forecast third-quarter revenue of about $16 billion, plus or minus 2%. Analysts polled by Refinitiv on average were expecting $12.61 billion.
Adjusted revenue in the second quarter was $13.51 billion, compared with estimates of $11.22 billion.
Revenue at the company’s data center business rose 141% to $10.32 billion in the quarter ended July 30, beating analyst estimates of $7.69 billion by greater than $2 billion, based on Refinitiv data.
“Its Q2 results underscore its dominant position in harnessing the AI momentum,” said Insider Intelligence senior analyst Jacob Bourne. “Yet as global appetite for Nvidia’s chips intensifies, navigating supply chain hurdles to spice up production is crucial.”
To that end, Nvidia is spending big to secure supply. The corporate reported a 53% jump to $11.15 billion of inventory commitments from the previous quarter, largely due to the long-term supply needs for its data center chips.
Analysts expect revenue from Nvidia’s data center segment to expand to as much as $40 billion for its fiscal 2025, based on Refinitiv estimates, driven by Nvidia’s edge in AI chips and other related technologies such as the software to place those chips to work to power products like OpenAI’s ChatGPT.
While rival Advanced Micro Devices’ key AI chip is anticipated to pry away some market share from Nvidia next yr, Nvidia’s software has a years’ long lead over its CUDA competitor called ROCm, analysts consider.
Sales of chips destined for private computers and data centers have been weak in recent months, which has hurt the chip industry. But AI is a brilliant spot, with cloud computing businesses and startups alike buying up AI-related chips from Nvidia and others such as Broadcom and Marvell Technology.
Analysts expect AI spending to proceed growing at the expense of other traditional server equipment.
Revenue at Nvidia’s gaming segment rose to $2.49 billion, above analyst estimates of $2.4 billion, based on Refinitiv data.
Excluding items, the company earned $2.70 per share in the second quarter, compared with estimates of $2.09, based on Refinitiv data.
For the current third quarter, Nvidia expects adjusted gross margin to be 72.5%, plus or minus 50 basis points. Analysts on average forecast gross margin to be 70.4%, based on Refinitiv data.