Nvidia Shatters Expectations with AI-Driven Revenue Surge
Nvidia (NVDA.O) delivered a stellar quarterly revenue forecast on Wednesday, far surpassing expectations due to an AI boom driving demand for its chips. The company also announced a $25 billion stock buyback, causing shares to soar after hours.
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The forecast, which exceeded expectations by billions, underscores the ongoing boom in generative AI technologies—largely powered by Nvidia's chips—that shows no signs of slowing down.
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The Santa Clara-based AI chip giant reported record revenue of $13.5 billion for the second quarter of its 2024 fiscal year, ending July 30.
Nvidia's data center business was a major growth driver, with revenue increasing 141 percent to $10.32 billion, beating analyst estimates by more than $2 billion.
AI Systems Propel Growth Beyond Chips
Jensen Huang, Nvidia’s co-founder and CEO, highlighted the transition of companies worldwide from general-purpose computing to accelerated computing and generative AI. This shift significantly boosts performance and efficiency.
Nvidia's comprehensive AI systems, not just its chips, were the largest contributors to this quarter's growth. These systems include memory chips from other suppliers and tens of thousands of other parts, reflecting Nvidia's dominant position in the AI market.
- Nvidia announced an additional $25 billion in share repurchases on Wednesday.
- Nvidia's shares have already tripled in value this year.
- Nvidia is now the first trillion-dollar chip company.
- Analysts estimate that demand for Nvidia's AI chips exceeds supply by at least 50%.
- This supply-demand imbalance is expected to persist for several quarters.
This high demand also lifted shares of other Big Tech and AI-related companies, with Microsoft jumping 1.9%, Meta Platforms up 2.1%, and Palantir Technologies surging 4.6% in extended trading.
Securing Supply Amid AI Boom
Nvidia is investing heavily to secure supply, reporting a 53% increase in inventory commitments to $11.15 billion from the previous quarter. This move is crucial to meet the long-term supply needs for its data center chips. Nvidia forecast third-quarter revenue of about $16 billion, plus or minus 2%, well above analysts' expectations of $12.61 billion.
The company's stock price rose 9.6% in after-hours trading, hitting an all-time high. Nvidia’s AI chips and related technologies, such as software for powering AI products like ChatGPT, are expected to drive data center segment revenue to as much as $40 billion for fiscal 2025, according to Refinitiv estimates.
Despite the competition from AMD's (AMD.O) key AI chip, analysts believe Nvidia’s software has a significant lead. Nvidia's gaming segment also saw revenue rise to $2.49 billion, above analyst estimates. Excluding items, Nvidia earned $2.70 per share in the second quarter, compared to estimates of $2.09.
While U.S. export restrictions on AI chip sales to China may pose a future challenge, Nvidia's CFO Colette Kress noted that these would not have an immediate impact. Instead, they could result in a permanent loss of opportunity for U.S. industry leadership in one of the world's largest markets.
