Nvidia revenue soars to record amid growing questions about AI spend, competition
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Nvidia, the most important stock in the world according to many on Wall Street, handily beat expectations Wednesday afternoon in an earnings report that reflects rising investments in AI across broad parts of the economy.
Why it matters: The company has become synonymous with AI, but that doesn't mean it can relax. Peers, startups and even its own customers are increasingly trying to encroach on its territory.
- Nvidia's main GPU rival AMD just agreed to acquire ZT Systems for a boost in engineering brain power.
- Chip- and AI-design upstarts Cerebras, d-Matrix and Groq have been raising hundreds of millions of dollars in venture capital.
- And Microsoft, Meta, Amazon, Alphabet and OpenAI, which are buyers of Nvidia's forthcoming Blackwell platform processors, each have been working on their own homegrown chips.
Reality check: Despite this stepped-up race in the AI chip game, Nvidia is reportedly under investigation from the DOJ related to whether it has abused its position of market dominance.
- Today's results may not help its case.
By the numbers: Demand for Nvidia's AI products and services generated a record $30 billion in revenue in its latest fiscal quarter.
- That's up 122% over the same period last year.
- Earnings came in at $0.67 a share, up 168% from last year.
- Analysts polled by FactSet were expecting $28.72 billion in revenue and earnings of $0.65 a share.
The company also projects revenue for the current quarter to reach $32.5 billion, which is higher than analyst consensus.
The big picture: Every earnings report from Nvidia is now a crucial one, as it's become the biggest and clearest barometer for the world's interest in AI.
- There were 285 mentions of Nvidia in the second quarter across all events, presentations and meetings of roughly 9,000 publicly traded companies around the world, according to market data provider AlphaSense.
- For context, in Q2 2024, there were 144 documents that mentioned "Boeing."
Questions of ROI
Questions have grown around whether companies spending billions with Nvidia or other AI tech will ever see sizable returns on their investments.
- CEO Jensen Huang was asked about his perspective on the issue twice on this afternoon's earnings call with analysts.
- He argued that new AI and accelerated computing infrastructure ultimately generate returns because they help businesses save on costs.
What they're saying: "Accelerated computing, of course, speeds up applications. It also enables you to do computing at a much larger scale, for example, scientific simulations or database processing. But what that translates directly to is lower cost and lower energy consumed," Huang said.
- "The people who are investing in Nvidia infrastructure are getting returns on it right away," he added.
What we're watching: Blackwell, the highly anticipated new line of AI chips, will start shipping out in Q4, Huang said.
- One analyst expects the products could drive the company's data center revenue to more than $200 billion this year, up from $47.5 billion last year.
The intrigue: Despite the strong results, shares of the company fell after hours Wednesday, reflecting the abnormal expectations placed on the company and the inherent volatility of the stock.
- Nvidia's average 30-day historical volatility this year is roughly twice the average for all other companies with market caps higher than $1 trillion, according to a Reuters analysis.
Editor's note: This story has been updated with new developments from the company's earnings call.
