Nvidia chief executive Jensen Huang in Gyeongju, South Korea, in October. The chip designer expects fourth-quarter sales of US$65-billion, above analysts' estimates.Lee Jin-man/The Associated Press
Nvidia NVDA-Q forecast fourth-quarter revenue above Wall Street estimates on Wednesday, betting on booming demand for its AI chips from cloud providers against the backdrop of widespread concerns of an artificial intelligence bubble.
The results from the AI chip leader mark a defining moment for Wall Street, as global markets looked to the chip designer to determine if investing billions of dollars in AI infrastructure expansion had resulted in towering valuations that potentially outpaced fundamentals.
The world’s most valuable company expects fiscal fourth-quarter sales of US$65-billion, plus or minus 2 per cent, compared with analysts’ average estimate of US$61.66-billion, according to data compiled by LSEG.
Shares of the AI market bellwether were up more than 4 per cent in extended trading.
Ahead of the results, doubts had pushed Nvidia shares down nearly 8 per cent in November, after a 1,200-per-cent surge in the past three years. The broader market has declined almost 3 per cent this month.
“Blackwell sales are off the charts, and cloud GPUs are sold out,” CEO Jensen Huang said in a statement. “The AI ecosystem is scaling fast – with more new foundation model makers, more AI startups, across more industries, and in more countries. AI is going everywhere, doing everything, all at once.”
Sales in the data-centre segment, which accounts for a majority of Nvidia’s revenue, grew to US$51.2-billion in the quarter ended Oct. 26. Analysts had expected sales of US$48.62-billion, according to LSEG data.
Bubble or breakout? Nvidia earnings put AI boom under the microscope
But some analysts noted that factors beyond Nvidia’s control could impede its growth.
“While GPU demand continues to be massive, investors are increasingly focused on whether hyperscalers can actually put this capacity to use fast enough,” said Jacob Bourne, an analyst with eMarketer. “The question is whether physical bottlenecks in power, land, and grid access will cap how quickly this demand translates into revenue growth through 2026 and beyond.”
Nvidia’s business also became increasingly concentrated in its fiscal third quarter, with four customers accounting for 61 per cent of sales. At the same time, it sharply ramped up how much money it spends renting back its own chips from its cloud customers who otherwise cannot rent them out, with those contracts totaling US$26-billion - more than double their US$12.6-billion in the previous quarter.
Still, analysts and investors widely expected the underlying demand for AI chips, which has powered Nvidia results since ChatGPT’s launch in late 2022, to remain strong. Huang said last month the company has $500 billion in bookings for its advanced chips through 2026.
Big Tech, among Nvidia’s largest customers, has doubled down on spending to expand AI data centres and snatch the most advanced, pricey chips as it commits to multi-billion, multi-gigawatt build-outs. Microsoft reported a record capital expenditure of nearly US$35-billion for its fiscal first quarter last month, with roughly half of it spent primarily on chips.
Nvidia said it expected adjusted gross margin of 75 per cent, plus or minus 50 basis points in the fourth quarter, compared with market expectation of 74.5 per cent.