Markets breathed a sigh of relief after Nvidia’s long-awaited earnings report beat expectations, with revenue up a staggering 262% year-over-year, pushing Nvidia’s share price to an all-time high of $1,017 after market close. Due to the huge demand for AI, the chipmaker also announced a 10-for-1 stock split, which will make the shares more accessible to retail investors and could further boost share prices.
“The industry is going through a major shift,” Nvidia CEO Jensen Huang said during a conference call Wednesday. “The next industrial revolution has begun. Companies and countries are partnering with Nvidia to move the trillion-dollar installed base of data centers to accelerate computing and build a new type of data center—AI factories—to produce a new commodity—artificial intelligence.”
Nvidia shares have fallen sharply over the past year, up 200% in the last 12 months and 87% since the start of 2024. peers including Amazon and Meta. “The most important stock on planet Earth,” according to Goldman Sachs, has helped lift the entire S&P 500 index to all-time highs, and the new earnings growth is a positive indicator that Nvidia has no intention of slowing down anytime soon.
Demand for Nvidia’s circuitry, known as graphics processing units (GPUs), and data centers has been “incredible,” Huang said. This phenomenon is largely due to applications such as ChatGPT and GPT-4, as well as the growing class of artificial intelligence startups, which Huang estimates includes between 15,000 and 20,000 firms. And that doesn’t take into account companies specializing in self-driving cars, digital character design and biotech firms, he said, which has led to even greater demand from customers.
“We race every day,” Huang said. “Customers put a lot of pressure on us to deliver systems and get them into service as quickly as possible.”
Nvidia has had no trouble beating lofty expectations over the past year, beating earnings per share estimates by an average of 20% over the previous four quarters through Wednesday’s report. So for the earnings report, Wall Street expectations were high, with analysts forecasting revenue of $24.65 billion. But the $26 billion Nvidia reported was good for 5.5% ahead of Nvidia’s data center revenue, which makes up the majority of its overall revenue. It came in at $22.6 billion for the quarter, above Wall Street’s estimate of $21.13 billion and up 427% from the year-ago period. Nvidia’s share price rose 4.4% in the aftermarket after the earnings release, breaking the $1,000 threshold for the first time during the earnings call.
“If 10 was amazingly good [result] in terms of growth, I would give it a seven or eight,” said technology investor and The Citadel finance professor Paul Meeks. Luck.
While Nvidia’s 10-for-1 stock split doesn’t have an immediate impact on its valuation, Meeks said making the stock cheaper and more accessible to retail investors is a smart move. Nvidia shares are currently trading at around $950, meaning that after the June 7 stock split, investors will likely be able to get shares for under $100.
“Stock splits are cosmetic… But when you get a stock down to about $100 a share and everyone on planet Earth knows it’s a leading tech stock… I do think there are probably some retail investors who are trying their best buy it now,” Meeks said. “It’s definitely positive overall.”
The source of Nvidia’s dominance is its huge lead in the AI hardware market. Nvidia was a pioneer in the development of graphics processing units, specialized computer chips that it initially used for games, but then pivoted to the market for artificial intelligence developers as the artificial intelligence sector boomed.
Nvidia’s hardware play is backed by deep investments in software: its CUDA software interface, which runs exclusively on its chips, is a must-have for many AI developers and is a key reason it has been able to defend its near-monopoly in the AI space.
Nvidia’s growth has been fueled by unrelenting demand, with the company forced to choose who gets first chips as everyone from data center operators to startups and big tech companies compete to get their hands on artificial intelligence computing power, especially its most advanced technologies. line of Blackwell and H200 chips, which the company says will begin shipping next quarter.
“Blackwell production is well underway…Demand for the H200 and Blackwell is significantly outpacing supply, and we expect demand could outpace supply as early as last year,” Nvidia CFO Colette Kress said in the earnings call.
“We will see strong earnings for Blackwell this year,” Huang added. And, “after Blackwell, there’s one more thing.”
Nvidia’s business outside of developing artificial intelligence chips has been relatively minor. The company’s gaming division, once the core of its business, posted revenue of $2.6 billion, down 8% from the previous quarter. Its auto division posted a profit of $329 million, but Nvidia’s other businesses paled in comparison to its investments in artificial intelligence chips.
However, since the beginning of this year, Nvidia’s rivals have been stepping up competition in the AI hardware space. Intel, which received $8.5 billion in CHIPS Act funding, last month released its Gaudi 3 AI chip, which will compete with Nvidia’s top-of-the-line Blackwell model. Big Tech AI developers, including Google and Microsoft, have announced they are developing their own AI chips to reduce dependence on Nvidia and cut costs.
“It’s a combination of some big companies saying, ‘We’re going to develop our own AI chips,’ and other industries saying, ‘We’re going to do this locally on our smaller, lower-power devices,’ which could be the case in the long run.” , which is holding back their growth,” said Edward Wilford, an analyst at technology consultancy Omdia. Luck.
Nvidia’s business model is not entirely vertically integrated: As a chip designer, it creates designs for semiconductors but outsources the actual production of its most advanced chips to TSMC, the Taiwanese giant that makes more than 90% of the world’s advanced chips. Cold relations between the US and China and the recent earthquake in Taiwan, which briefly closed TSMC’s headquarters, have some Nvidia investors nervous that any significant disruption to TSMC would be a big blow to the entire semiconductor supply chain.
“They will be well aware of how susceptible they are to TSMC and supply disruptions. They will be watching this closely,” Wilford said. “This is a business that can’t just be moved from one area to another… They want to make sure it’s protected at all costs. It’s going to be something that keeps some people up at night.”