Nvidia’s revenue soars 262% as AI chip demand climbs

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The excellent sales performance of artificial intelligence chips led to a remarkable 262% revenue increase for Nvidia in the last quarter. This achievement exceeded the high expectations of investors, which resulted in a positive response during after-hours trading on Wednesday as the company's shares rose higher.

In the three months leading up to April, the company made $26 billion in revenue, which exceeded the estimated amount of $24.7 billion. This incredible growth was consistent with the previous quarter, which also showed a 265% increase. Looking towards the next quarter, the company anticipates making roughly $28 billion in revenue, give or take 2%. This is higher than the estimated amount of $26.8 billion.

Nvidia's shares have been skyrocketing, having increased by over 90% since January. In trading that takes place after the regular markets close for the day, Nvidia's shares continued to climb. The company has also chosen to split its stocks at a ratio of 10 shares for each one share owned, starting from June 7. Additionally, Nvidia has decided to increase their quarterly cash dividend by a substantial 150%.

Traders were preparing for significant movements in the market, including Nvidia shares. The company has experienced a huge surge in value, making it a highly monitored entity on Wall Street. Its market capitalization has grown by more than six times, amassing a value of $2.3tn since the beginning of 2023. This growth has caused it to surpass Amazon and Alphabet's parent company, becoming the third most valuable US-listed firm.

The need for Nvidia's graphics processing units (GPUs) in AI data centres has significantly increased in the last 12 months, with the top technology companies competing to enhance their computing systems to launch cutting-edge AI products on a grand scale. Google, Microsoft, Meta, and Amazon have shown that they will continue to invest heavily until 2024.

The revenue earned by Nvidia's data centre, which is linked to its highly sought-after AI chips, skyrocketed by 427% in comparison to the same period of the previous year, amounting to $22.6 billion for the quarter.

Nvidia has been rapidly taking advantage of the increased need for AI and getting ahead of rivals and customers who are creating their own AI chips. Its latest Blackwell chips were unveiled in March and are claimed to be twice as powerful as the existing generation of chips for teaching AI models. They also deliver five times the performance on "inference" which means models can respond to questions much faster. This announcement comes only a year after the previous GPU chip architecture, Hopper, was revealed by Nvidia. Blackwell is scheduled to be shipped later this year.

Experts had raised concerns regarding the impact of Nvidia's shift to a fresh product range on its impressive growth trend that has been persisting in the previous quarters. They speculated that there could be a temporary decline in demand, leading to an "air pocket" situation. Nvidia's frequent launch of advanced chipsets has evenprompted Amazon to revise its initial order for chips that relied on Nvidia's previous architecture, ensuring that it is now supplied with the new Blackwell line instead.

The earnings per share that were diluted increased by a remarkable 600% compared to the same period last year, amounting to $5.98. The gross margin reached 78.4%, which was slightly higher than the predicted 77% by analysts. Additionally, the net income was $14.9 billion, which surpassed the expected value of $13.2 billion.

AMD and Intel, who are competing with each other, have launched their own AI data centre chips to challenge Nvidia's. They have also partnered with Nvidia's customers to provide substitutes to its software platform called Cuda. This solidifies Nvidia's position as a dominant chip supplier in the market.

Back in April, Intel and AMD stated that their first-quarter results were not as fruitful as they had hoped and their expectations were quite modest. This led to the assumption that they were unable to take advantage of the sudden increase in demand. However, on Tuesday, Microsoft revealed that it will now be resorting to the use of AMD's latest MI300X accelerator chips and its ROCm software in order to cater to the most challenging AI workloads on its Azure cloud service.

According to The Futurum Group's CEO, Daniel Newman, Nvidia performed exceptionally well in their data centre revenue and overall results. The market had high expectations for these numbers, and Nvidia exceeded them.

According to him, the stock split will increase accessibility and lead to more momentum for the stock. He also mentioned that the artificial intelligence industry is thriving.