“The chip maker reported record revenue, beating Wall Street estimates and increasing current-quarter guidance”
“Nvidia reported record sales and strong guidance Wednesday, helping soothe jitters about an artificial intelligence bubble that have reverberated in markets for the last week.”
“Sales in the October quarter hit a record $57 billion as demand for the company’s advanced AI data center chips continued to surge, up 62% from the year-earlier quarter and exceeding consensus estimates from analysts polled by FactSet. The company increased its guidance for the current quarter, estimating that sales will reach $65 billion—analysts had predicted revenue of $62.1 billion for the quarter.”
“Shares in the world’s most-valuable publicly-listed company rose as much as 6.5% in after-hours trading Wednesday.”
“We’ve entered the virtuous cycle of AI,” said Nvidia Chief Executive Jensen Huang. “AI is going everywhere, doing everything, all at once.”
For a moment now, however brief, Wall Street can focus again on the strong demand for Nvidia’s hardware and software products, despite concerns over an ‘AI Bubble’ in an era of massive ‘circular’ AI Infrastructure investments by big tech.
“Wednesday’s result will allow investors to breathe a sigh of relief. Each Nvidia quarterly earnings report has come to be seen as a financial Super Bowl of sorts as the AI boom has taken off. The company is regarded as a bellwether for both the health of the tech industry and the market as a whole.”
“This quarter, however, the stakes seemed higher. Rarely has an earnings report from a single company been greeted with such nervous anticipation.”
“In recent weeks, investors have sold off big tech names, worried that companies are spending far too much money on data centers, chips, and other infrastructure in the race to design and operate the world’s most powerful AI models, with little hope of recouping their investments in the near term.”
Again, the concerns over ‘boomerang’ cross-investments and mega revenue deals persist:
“Adding to the pressure is a flurry of recent AI deals structured using what critics have dubbed “circular” funding mechanisms—broadly referring to suppliers like Nvidia making large capital investments in the businesses of the customers who buy their products. Just a few months ago, investors viewed such deals with enthusiasm, pumping up shares for a variety of AI-related companies, but this week one such deal—between Nvidia, Microsoft and Anthropic—was greeted warily.”
“This week, 45% of global fund managers surveyed by Bank of America said that an AI stock-market bubble was one of the biggest risks facing the market.”
And some counter actions by some investors:
“A number of bearish moves by high-profile investors have also rattled tech markets. Last week, Masayoshi Son’s SoftBank Groupsold its entire $5.8 billion stake in Nvidia to divert that money to other AI investments, while a hedge fund run by influential billionaire venture capitalist Peter Thiel unloaded its entire $100 million Nvidia stake in the third quarter.”
“Earlier this month, Michael Burry—who famously predicted the popping of the subprime mortgage securities bubble and was profiled in the Michael Lewis book “The Big Short: Inside the Doomsday Machine”—revealed in a securities filing that he was betting against the stocks of both Nvidia and AI-heavy defense analytics firm Palantir.”
And China remains out of bounds for Nvidia sales there:
“The potential for revenue increases may be limited going forward after the Trump administration announced earlier this month that it is not considering allowing a version of the Blackwell chip to be sold in China, a fast-growing AI market that represents tens of billions of dollars in potential sales.”
“Half of the company’s long-term opportunity will come from customers’ transition to accelerated computing and generative AI, Colette Kress, Nvidia’s chief financial officer, said on a call with investors. While sizable purchase orders for Nvidia’s Hopper Platform never materialized in the quarter due to geopolitical issues with China, the company remains committed to engaging with governments, she added.”
Countered by the near-term strength in the insatiable demand for Nvidia’s products. Nvidia continues it reign this AI Tech Wave. Despite the walls of worry that remain to be climbed. Stay tuned.
(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here)
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