by Ian King

Chip maker Nvidia Corp., at the center of an industrywide race toward artificial intelligence computing, delivered its third consecutive sales forecast, beating Wall Street estimates on rising demand for its AI processors.

Shares rose more than 6% in extended trading after Nvidia said it would sell about $16 billion in the three months ending in October. Analysts had estimated only $12.5 billion, according to data compiled by Bloomberg. Nvidia’s results last quarter also blew past estimates, and it approved an additional $25 billion in stock buybacks.

The outlook underscores Nvidia’s role as a key beneficiary of the AI ​​computing boom. Faced with skyrocketing demand for chatbots and other tools, data center operators are stocking up on the company’s processors, which specialize in handling the heavy workloads required by artificial intelligence. This has helped Nvidia quickly exit an industrywide chip slump and accelerate sales growth to its fastest pace in years.

“A new computing era has begun,” CEO Jensen Huang said in a statement. That said, companies around the world are shifting toward more powerful computing that can handle ChatGPT-style generative AI.

The stock has more than tripled this year on post-market gains. Shares closed at $471.16 in New York on Wednesday ahead of Nvidia releasing its quarterly report.


The company said revenue more than doubled to $13.5 billion in the second quarter of the fiscal year ended July 30. Profit was $2.70 per share, net of certain items. Analysts had predicted sales of about $11 billion and profit of $2.07 billion.

Nvidia became the first semiconductor company to hit a market valuation of $1 trillion in May after another disappointing quarter. It has emerged as a key supplier of the infrastructure needed to support the growing use of AI systems. But investors are waiting for more evidence that the second quarter was the start of a long-term expansion, not a one-off spike. What they found on Wednesday was even faster than expected.

Underscoring Nvidia’s dramatic growth, this quarter’s revenue target is 28% above Wall Street estimates and roughly equal to the company’s total annual sales in 2021.

Another milestone: Nvidia’s quarterly sales surpassed Intel Corp’s for the first time. Although Nvidia’s valuation has been higher than Intel’s since 2020, posting higher revenue than the chip pioneer shows how widespread its products have become.

Nvidia was co-founded in 1993 by Huang, who still runs the company. He has successfully usurped a business making graphics chips for video games dominated by a market dominated by so-called accelerators – chips that help AI software train by bombarding it with data. The rapid introduction of software, along with increasingly more powerful processors by Nvidia, has left future rivals far behind. Microsoft Corp. and Alphabet Inc. such as customers. Meanwhile, Google is set to take as many chips as Nvidia can supply.

What Bloomberg Intelligence says:

“A significant 2Q beat and uptick, a recap of 1Q performance, suggests continued demand strength in Nvidia’s data center (DC) business, while guidance for 3Q 29% above consensus means the company expects Better supply can be found from Gross-margin growth (112 bps above consensus) is likely to continue as DC contribution rises.

– Kunjan Sobhani, BI Technology Industry Analyst

Click here to read the research.

Like many of its competitors, Nvidia does not operate its own chip production and relies on outsourced manufacturing provided by Taiwan Semiconductor Manufacturing Company and Samsung Electronics Co. This arrangement frees it from the heavy costs and risks of investing in manufacturing. But it also reduces the ability of supply to adjust quickly.

There were concerns that a supply shortfall could hamper Nvidia’s sales in the current quarter, but its forecast suggests that operations are running smoothly. Chief Financial Officer Colette Kress said the company is pleased with its progress in acquiring more components.

“We expect supply to increase each quarter over the next year,” he told analysts on a conference call.

Nvidia’s division that supplies chips to data centers — once a sideline business — has become its biggest money maker. Unit sales last quarter were $10.3 billion, compared to estimates of $7.98 billion. Gaming revenue was $2.49 billion, compared to the average analyst estimate of $2.38 billion. Automotive-related chips brought in $253 million.

The personal computer market, previously Nvidia’s largest source of revenue, had collapsed in the past year. But it has returned as a driver of development. The Santa Clara, California-based company said demand for laptop components is particularly strong.

AI has been the hottest topic for tech investors this year, and every major company has talked about their capabilities in that area. But Nvidia is one of the few making serious money from this trend, which has accelerated since the public debut of OpenAI’s ChatGPT in November. That tool helped showcase the potential of generative AI to a wider audience.

Nvidia’s stock has rallied more than 200% this year, outpacing gains of everyone else in the Philadelphia Stock Exchange Semiconductor Index.

The company’s advantage is even more notable because it can’t sell its entire lineup in China, the biggest chip market. The US government requires Nvidia to obtain a license to supply its best-performing AI-related chips to Chinese customers.

The announcement of that rule last year put a dent in shipments in Asian countries and forced Nvidia to rework one of its key products: the company has made sure that its graphics processor units, or GPUs Disabled one lest it trigger China. restrictions. But Bloomberg has reported that the Biden administration is considering new regulations that could limit sales of that component as well.

Nvidia’s CFO addressed that possibility on the call Wednesday.

“Given the strength of demand for our products around the world, we do not anticipate that additional export restrictions on our data center GPUs, if adopted, will have an immediate impact on our financial results,” he added. “However, in the long term, the ban on sales of our data center GPUs to China, if implemented, permanently robs the opportunity for US industry to compete and lead in one of the world’s largest markets.” will be lost.”

Nvidia has also become more important as the leader of the tech industry. The chipmaker’s forecasts provide a window into the plans of some of the world’s most valuable companies — and indicate how much they are willing to spend to overhaul computer systems to accommodate business AI.

Other chip makers, meanwhile, are attempting to catch Nvidia in AI processors, including top PC chip makers Advanced Micro Devices Inc. and Intel. But Nvidia continues to upgrade its products and release related software and services with the goal of maintaining its lead.

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