Nvidia earnings show AI hype isn’t slowing down

Nvidia, the chipmaker whose products have powered the generative AI craze in Silicon Valley, continues its winning streak.

In its earnings call this week, the company reported revenue of $13.51 billion in the second quarter, more than doubling its performance in the same period a year ago and jumping 88% from Q1. The company’s results beat the already bullish expectations of analysts polled by Zacks Investment Research.

Investors and analysts had looked to the earnings report on Wednesday as a bellwether of the continued health of the hype around generative AI. The company’s range of specialized graphic processing units (GPUs) have been central to the development of large language models like ChatGPT, which has vaulted Nvidia into the upper echelons of Big Tech with a market capitalization that crossed the $1 trillion mark earlier this year.

“A new computing era”: Nvidia co-founder and CEO Jensen Huang has framed his company’s newfound dominance as part of a broad shift in the amount of computing power necessary for business, as generative AI changes the way companies navigate information. Huang reiterated that framing in the earnings call this week.

“A new computing era has begun. The industry is simultaneously going through two platform transitions: accelerated computing and generative AI,” Huang said. “Nvidia has been preparing for this for over two decades and has created a new computing platform that the world’s industries can build upon.”

Ray of light: AI-related demand has been a bright spot in an otherwise sluggish market for chips used in smartphones, PCs, and data centers, which has left major chipmakers with a glut of supply following a previous shortage.

Competition from AMD: Nvidia is once again forecasting another quarter of huge growth, projecting revenue of around $16 billion in the next three months. In an emailed analyst note, Raj Joshi, SVP of Moody’s Investors Service, said Nvidia currently faces “no meaningful competition” until AMD ships its highly anticipated AI chips later this year or in early 2024.

“Gen AI infrastructure demand will remain robust over the next 18 to 24 months, as Gen AI applications are broadly deployed in on-premise and public cloud environments and enterprises train smaller, customized models for their use cases,” Joshi said in the note.

Huang said he expects demand to continue to grow for Nvidia’s AI infrastructure hardware as enterprise and cloud companies upgrade their data centers to accommodate the new boom around generative AI tools.

“The world has something along the lines of about a trillion dollars’ worth of data centers installed in the cloud and enterprise and otherwise,” Huang said. “And that trillion dollars of data centers is in the process of transitioning into accelerated computing and generative AI.”