Nvidia beats Q3 revenue estimates, helping counter fears of AI bubble
The company has faced growing fears that the runaway spending on such equipment is not sustainable
[SAN FRANCISCO] Nvidia, the world’s most valuable company, gave a strong revenue forecast for the current period, helping counter concern that an explosion in artificial intelligence (AI) spending is headed for a crash.
Sales will be about US$65 billion in the fiscal fourth quarter, which runs to January, the chipmaker said in a statement on Wednesday (Nov 19). Analysts had estimated US$62 billion on average, with some predictions ranging as high as US$75 billion.
The outlook signals that demand remains strong for Nvidia’s AI accelerators, the pricey and powerful chips used to develop AI models. Nvidia has faced growing fears that the runaway spending on such equipment is not sustainable.
Nvidia shares gained about 4 per cent in late trading after the report was released. They had been up 39 per cent this year through the close.
Chief executive officer Jensen Huang has downplayed concerns about an AI bubble and said last month that the company has more than US$500 billion of revenue coming over the next few quarters. Owners of large data centres will continue to spend on new gear because AI has begun to pay off, he said.
Regardless of how the latest quarter stacks up against projections, it marks a staggering run for the company. Sales will be up about 10-fold from where they were in the same period just three years ago. And Nvidia is on course to deliver more annual net income than two longtime rivals, Intel and Advanced Micro Devices (AMD), will report in sales.
But Nvidia’s expansion has faced challenges. US restrictions on the shipment of advanced chips to China have largely locked Nvidia out of a massive market for its products. Huang has lobbied Washington to overturn those rule, arguing that they are counterproductive to the national security concerns they are meant to serve.
Some investors have also expressed concerns about the structure of the megadeals that Nvidia has struck with customers. The transactions involve investments in startups such as OpenAI and Anthropic PBC, raising the issue of whether the pacts are creating artificial demand for computers.
Earlier this week, Nvidia and customer Microsoft said that they have committed to invest as much as US$15 billion in Anthropic. The startup has also pledged to purchase US$30 billion of computing capacity from Microsoft’s Azure cloud service and will work with Nvidia’s engineers on fine-tuning chips and AI models.
Meanwhile, some of Nvidia rivals have grown more optimistic that they can finally challenge the company’s dominance in AI accelerators. Earlier this month, AMD predicted accelerating growth for its AI chip business and talked up the prospects for forthcoming products.
AMD, Broadcom and Qualcomm have all announced tie-ups with large users of Nvidia’s chips. And data centre operators are increasingly looking to use more in-house designs, an effort that would make them less dependent on Nvidia supply.
But Huang is also pushing to spread the use of AI across more of the worldwide economy. The CEO has embarked on a globe-trotting tour to persuade government bodies and corporations to deploy his technology.
Nvidia, founded in 1993, pioneered the market for graphics chips used to create realistic images for computer games. AMD is its only remaining major rival in that business.
Nvidia built its AI dominance by adapting that same chip architecture to crunch massive amounts of data, helping researchers create software that’s begun to rival and resemble human capabilities.
The Santa Clara, California-based company still has more than 90 per cent of the market for AI accelerator chips. It’s added other products to that lineup to help solidify its edge, including networking, software and other services. BLOOMBERG
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