Chipmaker Nvidia's blockbuster earnings report late Wednesday is a strong sign that we're still only at the starting gate of Silicon Valley's AI boom, Axios' Scott Rosenberg and Ina Fried report.

Why it matters: The billions of dollars in cash that companies are laying out for Nvidia's AI chips show that there is more than stock speculation or vaporware products at play in the current frenzy.

How it works: Winners in the earliest phases of tech growth cycles like this one are always the sellers of the raw hardware businesses need to build out capacity in new platforms.

Flashback: In the mid-1990s, when every corporation in America suddenly realized they had to get onto the internet, there was only one company ready to supply, in bulk, the routers firms needed to connect. Cisco Systems made many fortunes as a result.

Today, the hot commodity is Nvidia's AI chips — specialized processors that are fine-tuned to accelerate the calculations underlying ChatGPT and other generative AI applications.

• That has put the company at the white-hot center of AI investment, and left Nvidia with more demand than it can handle.
• "A new computing era has begun," Nvidia founder and CEO Jensen Huang said in a statement. "Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI."

Driving the news: Nvidia reported $13.5 billion in revenue for its second quarter of 2023 — up 88% from the previous quarter and well ahead of the $11.2 billion that analysts were expecting. Sales were also more than double those from the same quarter a year ago, so it's not just a seasonal or cyclical change.

• Doubling revenue isn't unheard of for growth companies. Doubling it at this scale is rarer.
• Nvidia's forecast was also exceptionally bullish, with the company predicting revenue of $16 billion for the current quarter, well ahead of analysts' estimates of around $12.6 billion.

Between the lines: There's one unique factor contributing to Nvidia's knockout numbers, beyond broad AI fever.

• The global race to stockpile Nvidia's AI chips got a big boost from the Biden administration's sharp moves to keep advanced AI hardware out of China's hands.
• That has pushed Chinese firms to place $5 billion in orders from Nvidia this year, per the Financial Times, including orders for a special AI chip designed to comply with new U.S. export restrictions.
• Other nations, including Saudi Arabia and the UAE, have rushed to stockpile Nvidia chips as well, to hedge against the possibility of further U.S. limits.

The bull case: "This is NOT hype, it's jaw dropping spending happening NOW," Wedbush analyst Dan Ives wrote on X, formerly Twitter.

• "It's all about AI demand and use cases," Ives wrote. "The rest of tech will see this unprecedented spending wave not seen since 1995 over the coming years but Nvidia is on the front lines and the best barometer of true spending."

The bear case: Most booms are short-lived, and history shows the tech industry almost always overshoots, building way more capacity than it needs anticipating massive demand that often takes much longer than predicted. (See: The over-investment in bandwidth from the mid-90s to the early 2000s.)

• The chip industry is especially prone to this sort of cycle, and things can turn around quickly. Remember when car manufacturing lines slowed due to a lack of chips back in 2021? By this year, the industry was facing a glut of chips.
• Another factor that pushes these cycles to extremes: Companies tend to double their chip orders in times of shortage, then find themselves with extra inventory once consumer demand weakens.

What they're saying: An Nvidia representative told Axios that the company has been in close contact with its customers and doesn't believe it is seeing double ordering.

• As for China, chief financial officer Colette Kress said on the call that Nvidia believes it can absorb the types of export restrictions being discussed without taking a hit. But she warned that a long-term ban on the sale of data center GPUs to China would end up hurting the U.S., resulting in "a permanent loss of an opportunity for the U.S. industry to compete and lead in one of the world's largest markets."

Amazon announced new data controls for customers of its AWS cloud services on Wednesday — a bid to convince more governments and companies in regulated industries to ditch on-premises IT infrastructure in favor of cloud services.

• "Dedicated Local Zones" is a customizable AWS-managed service that AWS vice president Max Peterson told Axios would offer "all the control, without the operational burden" of running local infrastructure.

Why it matters: Nations around the world have heavily increased requirements that user data be stored locally, making it subject to local rules and laws.

• Around 75% of countries now have local storage requirements for at least one type of data, including China, Brazil, Indonesia, Nigeria, Russia, Australia and Spain.
• That's one reason government agencies and heavily regulated companies have hesitated to shift to cloud services, stifling an otherwise booming $400 billion a year industry dominated by American companies.

By the numbers: Around 90% of IT systems around the world still run on local infrastructure rather than cloud services, per Peterson.

What's happening: After requesting more data control options from AWS, the government of Singapore has signed on as the first customer of the service.

• Singapore will gain access to all of AWS's common services, but within the country's "stringent" legal framework, said Chan Cheow Hoe, Singapore's government chief digital technology officer, in a statement.

What they're saying: "Governments like Singapore have some workloads and some data [for which] they still have very specific access control requirements. This is really illustrative of Amazon working backward from customer requirements," Peterson said.

Be smart: AWS already offers a Digital Sovereignty Pledge and localized services across 33 regions globally, which the company insists will remain a "global backbone" of AWS services.

• On tap: A U.K.-hosted global AI Safety Summit will take place Nov. 1-2 at Bletchley Park, the celebrated World War II base of codebreakers and computing pioneers such as Alan Turing.
• Microsoft may bring AI to Windows apps like Paint and Photos. (Windows Central)
• Researchers have successfully enabled a paralyzed stroke patient to "speak" again by hooking her up to electrodes and an AI-powered avatar. (New York Times)
• Trading places: Emily Nishi is Discord's new chief human resources officer.

As an Australian wannabe American, I love that Australian Nina Kennedy and America's Olympic champion Katie Moon shared the women's pole vault gold medal at the World Track and Field Championships Wednesday.