Nvidia's AI Surge: Record Earnings and Soaring Stock Price

Nvidia tumbled though, having delivered a record quarter Tuesday and signaling that the AI boom shows no signs of slowing down, sending its already meteoric stock to $1,000 a share. The chips made by Nvidia have powered the rise of artificial intelligence, which is menacing to disrupt virtually every major industry. Chief Executive Jensen Huang declared it the beginning of a new industrial revolution and that Nvidia was playing a role in turning $1 trillion of data centers into "AI factories."

"AI will bring significant productivity gains to nearly every industry and help companies be more cost- and energy-efficient," Huang said Wednesday. Nvidia executives also told analysts that demand remains potent for the company's current AI chip as well as for its next generation product expected later this year.

Revenue in the latest quarter more than tripled from a year earlier to $26 billion, and net profit soared more than sevenfold to $14.88 billion. Both numbers were quarterly records for Nvidia, and beat analysts' expectations. Nvidia's chief financial officer, Colette Kress, said Wednesday that large cloud computing companies, including Google owner Alphabet, Microsoft and Amazon.com accounted for somewhere around 45% of the company's data-center revenue — more than $10 billion.

Nvidia shares have more than tripled in the last year, sending its valuation above $2 trillion. The stock rose 6% in afterhours trading Wednesday following its earnings report, surpassing $1,000 a share — although Nvidia said it would split its stock 10-for-1, effective June 7. It also increased its dividend to 10 cents a share from 4 cents, based on the current share count.

Nvidia turned sharply upward about a year ago, after OpenAI's ChatGPT wowed users with its ability to generate humanlike text. According to analysts, OpenAI used thousands of Nvidia's AI chips to create ChatGPT. A computation-intensive job like this that involves creating and deploying such systems doesn't leave much room for other alternatives.

Big tech companies and AI startups have since been scrambling to buy as many of the scarce chips of Nvidia as possible. That is a shortage that company executives expect to persist through this year and into next year. Nvidia's galloping growth rates are set to slacken, however.

That is mainly because it has been one year since its sales figures turned sharply upward. With its outlook of around $28 billion in sales for its current fiscal quarter, which also topped expectations, the company is around double its level in the same quarter last year.

Morgan Stanley analysts said in a note this week that the expected deceleration wasn't a problem for the company's stock because its valuation compared with its earnings was in line with many of its big-company peers.

The company, led by Mr. Huang, started more than three decades ago with a mission to improve computer graphics for gamers. Over the past decade and a half, it has repurposed its graphics chips to be used in other applications including AI, where its approach to computing, involving performing lots of calculations at once, made it a good fit.

The AI boom turned Nvidia's chips into hotly contested commodities, with tech CEOs jostling over who has more of them. Eager to keep that edge, Nvidia is set to roll out the newest generation of AI chips later this year, after demonstrating them in March at a conference some attendees described as the "AI Woodstock."

Those chips, which it code-named Blackwell, will sell for more than $30,000 apiece and will set the stage for further sales growth, providing appetite for AI chips continues to strengthen and Nvidia can keep both competitors and regulators at bay.

Huang said on Wednesday the company is now manufacturing the chips, with shipments expected to start in the second quarter, ahead of operations in the fourth quarter. He said those chips will bring in "a lot" of revenues this year.

The time it takes to get a delivered H100 AI has fallen from nearly a year to weeks, ahead of the introduction of Blackwell, which is the most advanced chip now available from Nvidia. Some of that is due to the chipmaker's efforts to get more supplies. Nvidia doesn't make its chips but outsources their production, mostly to Taiwan Semiconductor Manufacturing Co 2330 1.27%raise; green up pointing triangle.

Showing just how strong demand still is for the company's AI chips, Tesla, Meta Platforms and other technology companies said this year they will buy thousands of them to power their AI ambitions. Meta said it expects to have about 350,000 of the chips by year end, Chief Executive Mark Zuckerberg said in January.

It doesn't appear as though the buying of its current chips is slowing down while customers wait for the Blackwell chips to arrive later this year, according to Huang. "Demand is growing this quarter," he said, "and everybody is anxious to get their infrastructure online because they are making money from it."