Computer chipmaker Nvidia blew past expectations with its quarterly revenue forecast on Aug. 23 as an artificial intelligence (AI) boom fueled demand for its technology.
Nvidia’s revenue for its fiscal second quarter doubled from the same time last year to $13.5 billion, raking in a profit of $6.2 billion.
Revenue at the company’s data center business rose 141 percent to $10.32 billion in the quarter ended July 30, beating analyst estimates of $7.69 billion by more than $2 billion, according to Refinitiv data.
The chipmaker’s sales growth is spurred by the company’s specialized chips that power much of the world’s major AI technology.
Specifically, the company said the biggest sales driver this quarter was its HGX system, which is an entire computer built around Nvidia’s chip.
The 30-year-old company is now valued at $1.2 trillion, a threshold that thrust the company into the tech industry’s elite.
“This is a new computing platform, if you will, a new computing transition that is happening,” Nvidia CEO Jensen Huang said Wednesday during a conference call with analysts.
The Santa Clara, California, company predicted its revenue for its August-October quarter will total $16 billion, nearly tripling its sales from the same time last year.
Nvidia also said on Wednesday it would buy back $25 billion worth of its shares, a move most companies make when their leadership thinks the company is undervalued.
“We have excellent visibility through the year and into next year, and we’re already planning the next generation infrastructure with leading (cloud computing firms) and data center builders,” Huang told investors.
Analysts have estimated that demand for Nvidia’s AI chips is exceeding supply by at least 50 percent, adding that the imbalance will stay in place for the next several quarters.
“Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI,” Jensen Huang, Nvidia’s chief executive, said in a statement.
While some market observers are optimistic about Nvidia’s future growth and stock price, others believe investors are getting carried away.
“This level of hype is dangerous as it could lead investors to assume that these stocks are a silver bullet to build long-term wealth—and they are not, at least not on their own,” warned Nigel Green, CEO of deVere Group.
Although known for its graphics processing units (GPUs), Nvidia produces whole AI machines with memory chips from other suppliers and tens of thousands of other parts.
The company has a near-monopoly on the computing systems used to power services like ChatGPT, OpenAI’s blockbuster generative AI chatbot.
AI chips are designed to perform artificial intelligence tasks faster and more efficiently. While general-purpose chips like CPUs can also be used for simpler AI tasks, they’re “becoming less and less useful as AI advances,” a 2020 report from Georgetown University’s Center for Security and Emerging Technology notes.
“Because of their unique features, AI chips are tens or even thousands of times faster and more efficient than CPUs for training and inference of AI algorithms,” the report adds, noting that AI chips can also be more cost-effective than CPUs due to their greater efficiency.
