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Nvidia Rises Most in About Nine Months as AI Drives Sales

Nvidia Rises Most in About Nine Months as AI Drives Sales

(Bloomberg) -- Nvidia Corp. rose the most in about nine months after the chipmaker delivered another eye-popping sales forecast, adding fresh momentum to a stock rally that already made it the world’s most valuable chipmaker.

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Revenue in the current period will be about $24 billion, the company said in a statement Wednesday. Analysts had predicted $21.9 billion on average. Results in the fourth quarter also sailed past Wall Street estimates.

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The outlook extends a streak of Nvidia shattering expectations, thanks to insatiable demand for its artificial intelligence accelerators — highly prized chips that crunch data for AI models. The technology has helped power a proliferation of chatbots and other generative AI services, which can create text and graphics based on simple prompts.

“Accelerated computing and generative AI have hit the tipping point,” Chief Executive Officer Jensen Huang said in the statement. “Demand is surging worldwide across companies, industries and nations.”

The shares jumped 16% to $785.38 as the close Thursday in New York, a record high and the biggest single-day increase since May.

Nvidia’s market capitalization has now increased by more than $650 billion this year — bringing its valuation to $1.89 trillion — as investors bet that the company will remain the prime beneficiary of an AI computing boom.

That turned Wednesday’s report into a highly anticipated event for both Wall Street and the tech world. And the numbers — along with the upbeat tone from Huang — renewed confidence that spending will stay strong.

Shares of Advanced Micro Devices Inc., Broadcom Inc. and Marvell Technology Inc. — three other chipmakers expected to benefit from AI growth — also gained on Thursday.

“The entire market is watching this report and expectations have been elevated,” Wolfe Research analyst Chris Caso said in a note. Guidance was strong enough to “demonstrate continued momentum, while also leaving room for continued upside through the second half.”

New Cycle

On a conference call with analysts, Huang said that demand for Nvidia’s newest products will continue to outstrip supply for the rest of the year. Though supply is growing, demand isn’t showing any signs of slowing, he said.

“Generative AI has kicked off a whole new investment cycle,” Huang said. That will lead to a doubling of the world’s data center installed base over the next five years and “represent an annual market opportunity in the hundreds of billions,” he said.

Nvidia, co-founded by Huang in 1993, got its start as a provider of graphics cards for computer gamers. Its profile blew up in the last two years, when its technology proved adept at handling heavy AI workloads. The company’s H100 accelerators have become legendary in the tech world, with customers scrambling to get their hands on as many as possible.

Companies such as Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. and Alphabet Inc.’s Google are Nvidia’s largest customers, accounting for nearly 40% of its revenue, as they rush to invest in hardware for AI computing.

In the fiscal fourth quarter, which ended Jan 28, Nvidia’s revenue more than tripled to $22.1 billion. Profit excluding certain items was $5.16 a share. Analysts had predicted sales of about $20.4 billion and earnings of $4.60 a share. Underscoring the magnitude of its recent growth streak: As recently as 2021, Nvidia didn’t generate that much revenue in an entire year.

Nvidia’s data center division, now by far its largest source of sales, generated $18.4 billion of revenue, up 409% from the same period a year earlier. Gaming chips provided $2.87 billion of sales.

Nvidia is now working to spread its AI technology beyond the big data-center companies. Huang, 61, has traveled the globe arguing that governments and corporations need their own AI systems — both to protect their data and gain a competitive advantage.

Nvidia announced a deal with Cisco Systems Inc. earlier this month that gives it a new distribution channel. As part of that deal, Cisco, the world’s biggest provider of networking gear, will help sell complete AI systems to companies.

Read More: Nvidia, Cisco to Help Companies Build In-House AI Computing

But Nvidia faces risks, including mounting competition and a push by some customers to develop their own AI chips.

AMD recently began selling a line of accelerators called the MI300. It expects to get revenue of $3.5 billion from that product this year, up from an earlier projection of $2 billion. Nvidia isn’t standing still, though. Analysts expect the company to soon unveil more powerful accelerators.

Nvidia also has had to navigate new export rules for chips headed to China, the largest market for semiconductors. The company has scaled down the capabilities of its products in order to continue to sell to that region, which in the past has accounted for a quarter of revenue. Three months ago, Chief Financial Officer Colette Kress told analysts that the company’s projections would have been higher if it weren’t for the China rules.

In terms of data center revenue, China accounted for a mid-single-digit percentage in the fourth quarter. “We expect it to stay in a similar range in the first quarter,” Kress said Wednesday.

The company has begun sending samples of new chips that are compliant with restrictions to Chinese customers, Huang said. That should help business pick up again.

“We’re going to do our best to compete in that marketplace and succeed in the marketplace,” Huang said.

(Updates with closing shares in the fifth paragraph.)

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