Nvidia expects revenue to rebound as artificial intelligence boosts chip demand

Soaring demand for the chips needed to train the latest wave of generative artificial intelligence systems, such as ChatGPT, prompted Nvidia to issue a revenue forecast that far exceeded Wall Street’s expectations, sending shares soaring in aftermarket trading.

The U.S. chip maker said on Wednesday that it expects to reach $11 billion in the three months to the end of July, more than 50 percent higher than the $7.2 billion expected by analysts and cementing its position as the chip’s biggest short-term gainer. AI competition that has broken out in the tech industry.

The forecast led to a 27 percent jump in Nvidia’s shares, which have more than doubled since the start of the year, pushing its market value to a record $960 billion.

CEO Jensen Huang said the company is “significantly increasing our offerings to meet increased demand” for its entire family of data center chips, including the H100, a new product launched this year that is called large language models such as OpenAI GPT-4.

The race to develop larger AI models in the tech industry has led some buyers to privately worry about the shortage of H100 chips, which only went on sale earlier this year. However, Nvidia’s $4.28 billion in sales to its data center customers in the most recent quarter beat even the most optimistic analyst forecasts, and the company said sales of both the H100 and A100 chips based on the previous chip architecture were strong.

CFO Colette Kress pointed to a further surge in demand well beyond the current quarter, although she said it was too early to provide longer-term financial guidance for the company. Visibility of future demand has “extended for several quarters” and has prompted Nvidia to “source substantially more supply in the second half”. [fiscal] year,” he said.

Nvidia forecast that sales to data center customers could double in three months, even though data center sales were $17 billion annually in the opening quarter of the year. According to Kress, the growth will come from customers, with consumer Internet companies, cloud computing providers and enterprise customers all rushing to adopt generative artificial intelligence in their businesses.

The knock-on forecast was that Nvidia’s revenue and earnings in its most recent quarter to the end of April also beat forecasts, thanks to a jump in sales to data center customers as demand for AI surged. Revenue reached $7.19 billion, up 19 percent from the previous three months, but down 13 percent from a year earlier as sales of chips for gaming systems fell.

Earnings per share rose 22 percent from a year earlier to 82 cents, or $1.09, according to Wall Street estimates, on a pro forma basis. The Wall Street consensus was for revenue of $6.52 billion and pro forma earnings of 92 cents per share.