Global stock markets experienced an upward trend following Nvidia’s impressive third-quarter profits, which surpassed Wall Street forecasts, easing concerns that the AI company’s skyrocketing valuations might have reached their limit.
On Wednesday, all attention turned to Nvidia, the frontrunner in the AI industry and the highest valued publicly traded company globally. Analysts and investors were eager for the chip maker’s third-quarter results, hoping they would dispel worries about an impending bubble in the sector.
Nvidia’s founder and CEO, Jensen Huang, addressed these apprehensions right at the start of the earnings call, emphasizing that a significant transformation is underway in AI, and Nvidia stands at the core of this change.
“Many discuss the AI bubble,” Huang noted. “From our viewpoint, the situation looks quite different. To clarify, Nvidia differs from other accelerators. We shine at every phase of AI, from pre-training through to inference.”
The company consistently exceeded Wall Street’s expectations across multiple metrics, indicating that the substantial AI economic boom is not decelerating. Nvidia announced diluted earnings per share of $1.30 on total revenues of $57.01 billion, which topped investor expectations of $1.26 per share on revenues of $54.9 billion. Sales surged by 62% year over year, with data center revenues reaching $51.2 billion—surpassing the anticipated $49 billion. The company also forecasts fourth-quarter sales to be around $65 billion, exceeding analyst expectations of $61 billion.
During a conference call with investors, Huang outlined three pivotal shifts in platforms: the move from general-purpose computing to accelerated computing, the transition toward generative AI, and the development of agential and physical AI, such as robotics and autonomous vehicles.
“When contemplating infrastructure investments, consider three fundamental dynamics,” Huang stated. “Each one adds to the wealth of infrastructure. Nvidia… facilitates all three transitions, and we do so across all types and modalities of AI.”
He further noted that demand for Nvidia’s chips continues to expand.
“AI permeates everywhere and operates on multiple fronts simultaneously.”
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According to Thomas Monteiro, Senior Analyst at Investing.com, “This clarifies many uncertainties surrounding the AI revolution; the essence is clear: The AI revolution is far from nearing its peak. Despite investor concerns that rising capital expenditures may compel firms to decelerate their adoption cycles for AI, Nvidia continues to demonstrate that data center growth is not merely an alternative but an essential requirement for every tech company globally.”
Analysts and experts expressed confidence that Nvidia would exceed Wall Street’s forecasts but were keenly awaiting further insights regarding industry demand for the company’s AI chips.
“There’s no denying Nvidia maintains its position as the dominant player in AI-centric chips,” noted David Meyer, a senior analyst at the investment platform Motley Fool. “We anticipate that revenue, margins, and cash flow will align closely with analysts’ predictions. However, invaluable insights are more likely to stem from management’s commentary on their market outlook, whether concerning the AI sector or new markets they are exploring.”
In November, Nvidia’s shares experienced a 7.9% decline amid significant investors offloading their holdings. Peter Thiel’s hedge fund teal macro divested its entire stake in the chipmaker in the last quarter, with estimates of around $100 million in assets, according to Reuters. SoftBank also offloaded $5.8 billion worth of its shares, heightening concerns regarding an AI bubble.
Following the news, Nvidia’s shares, having recently achieved the milestone of being the world’s first $5 trillion company, increased by over 5% in after-hours trading, with S&P 500 and Nasdaq futures also climbing. Asian markets rose on Thursday as well.
However, Stephen Innes of SPI Asset Management cautioned: “NVIDIA’s latest forecast has thus far alleviated some of the most intense apprehensions regarding an AI bubble looming over global markets… Nevertheless, this situation still leaves markets precariously balanced between exuberance over AI and the sobering reality marked by debt.”
“We do not believe Nvidia’s growth can be sustained in the long run,” asserted Alvin Nguyen, senior analyst at Forrester. “Although the demand for AI is unmatched, we anticipate Nvidia’s stock growth may slow if market corrections occur, balancing supply with demand, innovation progresses at a slower pace, or companies become acclimated to the current rate.”
Source: www.theguardian.com
