Nvidia’s AI boom exceeds Wall Street’s lofty hopes

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Nvidia’s revenue more than doubled in the latest quarter on soaring demand for the chips needed to train the latest artificial intelligence models, outstripping even the heightened estimates that had spread on Wall Street in recent days.

The US chipmaker also projected a bigger leap than expected in revenue in its current quarter, confirming that it was overcoming supply constraints more quickly than anticipated.

The latest figures sent Nvidia’s shares 7 per cent higher in after-market trading on Wednesday, capping a rally that had already seen its stock market value more than triple this year to about $1.2tn. Nvidia’s surging stock price has made it one of the biggest factors behind the AI-fuelled tech rally that has underpinned the broader US stock market this year.

According to published estimates, Wall Street analysts had been anticipating revenue of about $11.15bn for the latest quarter, with $12.5bn for the third quarter. But informal projections had raced ahead, with “whisper” estimates suggesting sales could hit more than $12bn in the second quarter followed by $14bn in the third.

In the event, Nvidia reported revenue of $13.1bn for the second quarter and said that it expected sales to hit $16bn in the current period, which ends in October. The third-quarter figure is close to the quarterly sales level that many analysts had not expected Nvidia to achieve until next year.

Soaring demand for Nvidia’s GPUs, which dominate the market for training AI models, has made it the biggest winner from this year’s boom in the industry. Supply rather than demand has become the main constraint on Nvidia’s growth in the short term.

Jensen Huang, Nvidia’s chief executive, said the biggest cloud computing companies announced “massive infrastructures” in the latest quarter based on Nvidia’s newest AI chips, while other tech companies had struck partnerships with Nvidia to spread the latest AI technology to every industry. “The race is on to adopt generative AI,” he said.

The jump in sales lifted Nvidia’s after-tax profits to nearly $6.2bn, up from just over $2bn the year before. Pro forma earnings per share rose to $2.70, compared with Wall Street expectations of $2.02.