Nvidia's Sales Triple on AI Boom's Stamina --- Hot chip market spurs soaring results and better-than- expected forecast

"Nvidia delivered a record quarter and signaled that the AI boom is still going strong, driving its already meteoric stock up Wednesday evening above $1,000 a share.

The chips made by Nvidia have powered the rise of artificial intelligence, which is threatening to disrupt virtually every major industry. Chief Executive Jensen Huang declared the beginning of a new industrial revolution where Nvidia was helping turn $1 trillion of data centers into "AI factories."

"AI will bring significant productivity gains to nearly every industry and help companies be more cost- and energy-efficient," Huang said Wednesday.

Nvidia executives also told analysts that demand remains strong for the company's current AI chip as well as for its next-generation product expected later this year.

Revenue in the latest quarter more than tripled from a year earlier to $26 billion, and net profit soared more than sevenfold to $14.88 billion. Both numbers were quarterly records for Nvidia, and beat analysts' expectations.

Nvidia's chief financial officer, Colette Kress, said that large cloud-computing companies such as Alphabet's Google, Microsoft and Amazon.com accounted for somewhere around 45% of the company's data-center revenue -- more than $10 billion.

Nvidia's stock price has more than tripled in the past 12 months, sending its valuation above $2 trillion. The stock rose 6% in after-hours trading following its earnings report, surpassing $1,000 a share -- although Nvidia said it will split its stock 10-for-1, effective June 7. It also increased its dividend to 10 cents a share from 4 cents, based on the current share count.

Nvidia's sales turned sharply upward about a year ago, after OpenAI's ChatGPT wowed users with its ability to generate humanlike text. OpenAI used thousands of Nvidia's AI chips to create ChatGPT, analysts say, and there are few alternatives for the computation-intensive job of creating and deploying such systems.

Big tech companies and AI startups have since been scrambling to buy as many of Nvidia's chips as possible, leading to a shortage that company executives expect to persist through this year and into next year.

Nvidia's galloping growth rates are set to slow, owing mainly to the tougher comparisons to last year. The company's outlook of around $28 billion in sales for its current fiscal quarter, which also topped expectations, is around double its level in the same quarter last year.

Morgan Stanley analysts said in a note this week that the expected deceleration wasn't a problem for the company's stock because its valuation compared with its earnings was in line with many of its big-company peers.

Led by Huang, the company started more than three decades ago with a mission to improve computer graphics for gamers. Over the past decade and a half, it has repurposed its graphics chips to be used in other applications including AI, where its approach to computing, involving doing lots of calculations simultaneously, made it a good fit.

The AI boom made Nvidia's chips into hotly contested commodities, with tech CEOs jostling over who has more of them. Determined to stay atop the heap, Nvidia plans to launch a new generation of AI chips late this year, following their unveiling in March at a company conference that some dubbed the "AI Woodstock."

Those chips, code-named Blackwell, are set to cost more than $30,000 each, setting the stage for a further surge in sales if the appetite for AI chips stays strong and Nvidia fends off challenges from competitors and regulators.

Huang on Wednesday said the company was producing the chips now and shipments would start in the second quarter ahead of them being in operation in the fourth quarter. Those chips would bring in "a lot" of revenue this year, he said.

In the lead-up to the Blackwell chips' introduction, the time it takes to get an H100 AI chip -- the most advanced currently available from Nvidia -- has fallen from nearly a year to a number of weeks, analysts say, partly reflecting the company's efforts to secure more supplies.

Nvidia doesn't make its chips, but contracts out their manufacturing largely to Taiwan Semiconductor Manufacturing Co.

Underlining still-strong demand for the company's AI chips, Tesla, Meta Platforms and other technology companies have said this year that they plan to buy thousands of them to fuel their AI efforts. The Facebook parent expected to have about 350,000 H100s by the end of this year, Chief Executive Mark Zuckerberg said in January.

Demand for both Nvidia's current advanced AI chips and Blackwell chips was continuing to run ahead of supply, Kress said in a call with analysts, an imbalance that would persist "well into next year."

Huang suggested there was no pause in buying of Nvidia's current chips as customers await the arrival of Blackwell chips later this year.

Demand was growing this quarter, he said, and "everybody is anxious to get their infrastructure online" because they are making money from it." [1]

1. Nvidia's Sales Triple on AI Boom's Stamina --- Hot chip market spurs soaring results and better-than- expected forecast. Fitch, Asa.  Wall Street Journal, Eastern edition; New York, N.Y.. 23 May 2024: A.1.