Nvidia Corp failed to live up to investors’ hopes with the latest results on Friday, sending underwhelming forecasts and news of production snags with the long-awaited Blackwell Chips.
The company’s quarterly report — the most anticipated part of the tech industry’s earnings season — met or beat analyst estimates on nearly every measure. But Nvidia investors have grown accustomed to blowout quarters, and the latest numbers don’t hold up.
Moreover, Nvidia’s next big cash cow – the new Blackwell processor line – has proven more challenging for the factory than anticipated. The product is the next generation of the company’s dominant artificial intelligence processor, and fears of a delay sent shares down as much as 8.4% in late trading. The stock has doubled this year through Wednesday’s close, after a 239% gain in 2023.
“It rose against lofty and unsustainable expectations,” Bloomberg Intelligence analysts Kunjan Sobhani and Oscar Hernandez Tejada said in a note.
Third-quarter revenue will be about $32.5 billion, the company said. Although analysts had predicted an average of $31.9 billion, the estimate was up to $37.9 billion.
The disappointing outlook threatens to dampen the AI ​​frenzy that has turned Nvidia into the world’s second most valuable company. The chipmaker has been a major beneficiary of the race to upgrade its data centers to handle AI software, and sales forecasts have become a barometer of that spending boom.
In the announcement, there were concerns that Nvidia was having problems with the new Blackwell design. The company acknowledged that there were problems with production, saying it was making changes to improve manufacturing yield – the number of chips coming out of the factory. At the same time, the company said that it will generate “several billion dollars” in the fourth quarter from the product.
Supply will increase after manufacturing gains momentum, Chief Executive Officer Jensen Huang said later during a Bloomberg Television interview. “We’re going to have lots and lots of supply, and we’re going to be able to ramp it up,” he said.
Nvidia has come from a string of quarters that broke the expectations of Wall Street – even as analysts continue to raise estimates. But the rising number has a downward trend.
Most of Nvidia’s growth also comes from a small group of customers. About 40% of Nvidia’s revenue comes from operators of large data centers – companies like Alphabet Inc’s Google and Meta Platforms Inc – which are pouring tens of billions of dollars into AI infrastructure.
Even though Meta and others have increased their capital spending budgets this earnings season, there are concerns that the amount of infrastructure they are taking on exceeds current requirements. That can cause bubbles. But Nvidia’s Huang has maintained that this is just the beginning of a new era for technology and economy.
Expectations were high. Nvidia has been the best-performing stock in the S&P 500 Index this year, outpacing the gains of all other semiconductor companies. With a market value of more than $3 trillion, Nvidia is worth roughly the same as the next 10 largest chip companies combined.
Nvidia made its name by selling video-game cards, but is now better known for its AI accelerators. These chips, derived from graphics processors, are used to develop artificial intelligence software by bombarding information.
This process, known as training, makes AI models better at recognizing and responding to real-world input. Nvidia components are also used in systems that then run software, a stage known as inference, and help power services such as OpenAI ChatGPT.
Last quarter’s results beat Wall Street projections, and the Santa Clara, California-based company’s board approved an additional $50 billion in share buybacks.
Nvidia’s revenue more than doubled to $30 billion in the second fiscal quarter, which ended July 28. Excluding certain items, the profit was 68 cents. Analysts had predicted sales of about $28.9 billion and earnings of 64 cents per share.
Nvidia is getting a jump on other chip makers because its technology is well suited to AI needs. But competitors are trying to catch up. Advanced Micro Devices Inc. now its closest competitor, with Intel Corp. — once the world’s largest chip maker — went further. The combined revenue from the market is only about 5% of Nvidia’s total.
Nvidia’s data center division – currently its biggest source of sales – generated $26.3 billion in the last quarter. Game chips are available for $2.9 billion. Analysts have given targets of $25.1 billion for the data center unit and $2.79 billion for gaming.
Blackwell is expected to generate a fresh wave of growth as it launches in the coming months. Analysts have downplayed concerns about delays, noting that the company still enjoys huge demand for the current generation of products. This could help Nvidia overcome the delay without any financial problems.
When explaining the challenges with Blackwell, Nvidia said it had to change the mask production steps to improve its results. The mask is a template used to burn the circuit pattern into the material stored on the silicon disk.
Blackwell production is set to ramp up in the fourth quarter and continue into the next fiscal year, Nvidia said.
During the post-results conference call, analysts sought more details about the amount of revenue that the new Blackwell chips will deliver and when. Huang and Chief Financial Officer Colette Kress kept their promise of a billion dollars in the fourth quarter, declining to elaborate further.
Shares are beyond decline as calls continue and no answers are given.
In typical fashion, Huang made a high-level prediction about the future of the computing industry, arguing that trillions of dollars worth of equipment would be needed to replace aging equipment in data centers around the world. The replacement process has only just begun, he said.
AI is taking over computer searches, helping companies streamline business processes, and is needed by countries to secure data, he said.
“It affects how each layer of computing is done,” Huang said.
The company’s quarterly report — the most anticipated part of the tech industry’s earnings season — met or beat analyst estimates on nearly every measure. But Nvidia investors have grown accustomed to blowout quarters, and the latest numbers don’t hold up.
Moreover, Nvidia’s next big cash cow – the new Blackwell processor line – has proven more challenging for the factory than anticipated. The product is the next generation of the company’s dominant artificial intelligence processor, and fears of a delay sent shares down as much as 8.4% in late trading. The stock has doubled this year through Wednesday’s close, after a 239% gain in 2023.
“It rose against lofty and unsustainable expectations,” Bloomberg Intelligence analysts Kunjan Sobhani and Oscar Hernandez Tejada said in a note.
Third-quarter revenue will be about $32.5 billion, the company said. Although analysts had predicted an average of $31.9 billion, the estimate was up to $37.9 billion.
The disappointing outlook threatens to dampen the AI ​​frenzy that has turned Nvidia into the world’s second most valuable company. The chipmaker has been a major beneficiary of the race to upgrade its data centers to handle AI software, and sales forecasts have become a barometer of that spending boom.
In the announcement, there were concerns that Nvidia was having problems with the new Blackwell design. The company acknowledged that there were problems with production, saying it was making changes to improve manufacturing yield – the number of chips coming out of the factory. At the same time, the company said that it will generate “several billion dollars” in the fourth quarter from the product.
Supply will increase after manufacturing gains momentum, Chief Executive Officer Jensen Huang said later during a Bloomberg Television interview. “We’re going to have lots and lots of supply, and we’re going to be able to ramp it up,” he said.
Nvidia has come from a string of quarters that broke the expectations of Wall Street – even as analysts continue to raise estimates. But the rising number has a downward trend.
Most of Nvidia’s growth also comes from a small group of customers. About 40% of Nvidia’s revenue comes from operators of large data centers – companies like Alphabet Inc’s Google and Meta Platforms Inc – which are pouring tens of billions of dollars into AI infrastructure.
Even though Meta and others have increased their capital spending budgets this earnings season, there are concerns that the amount of infrastructure they are taking on exceeds current requirements. That can cause bubbles. But Nvidia’s Huang has maintained that this is just the beginning of a new era for technology and economy.
Expectations were high. Nvidia has been the best-performing stock in the S&P 500 Index this year, outpacing the gains of all other semiconductor companies. With a market value of more than $3 trillion, Nvidia is worth roughly the same as the next 10 largest chip companies combined.
Nvidia made its name by selling video-game cards, but is now better known for its AI accelerators. These chips, derived from graphics processors, are used to develop artificial intelligence software by bombarding information.
This process, known as training, makes AI models better at recognizing and responding to real-world input. Nvidia components are also used in systems that then run software, a stage known as inference, and help power services such as OpenAI ChatGPT.
Last quarter’s results beat Wall Street projections, and the Santa Clara, California-based company’s board approved an additional $50 billion in share buybacks.
Nvidia’s revenue more than doubled to $30 billion in the second fiscal quarter, which ended July 28. Excluding certain items, the profit was 68 cents. Analysts had predicted sales of about $28.9 billion and earnings of 64 cents per share.
Nvidia is getting a jump on other chip makers because its technology is well suited to AI needs. But competitors are trying to catch up. Advanced Micro Devices Inc. now its closest competitor, with Intel Corp. — once the world’s largest chip maker — went further. The combined revenue from the market is only about 5% of Nvidia’s total.
Nvidia’s data center division – currently its biggest source of sales – generated $26.3 billion in the last quarter. Game chips are available for $2.9 billion. Analysts have given targets of $25.1 billion for the data center unit and $2.79 billion for gaming.
Blackwell is expected to generate a fresh wave of growth as it launches in the coming months. Analysts have downplayed concerns about delays, noting that the company still enjoys huge demand for the current generation of products. This could help Nvidia overcome the delay without any financial problems.
When explaining the challenges with Blackwell, Nvidia said it had to change the mask production steps to improve its results. The mask is a template used to burn the circuit pattern into the material stored on the silicon disk.
Blackwell production is set to ramp up in the fourth quarter and continue into the next fiscal year, Nvidia said.
During the post-results conference call, analysts sought more details about the amount of revenue that the new Blackwell chips will deliver and when. Huang and Chief Financial Officer Colette Kress kept their promise of a billion dollars in the fourth quarter, declining to elaborate further.
Shares are beyond decline as calls continue and no answers are given.
In typical fashion, Huang made a high-level prediction about the future of the computing industry, arguing that trillions of dollars worth of equipment would be needed to replace aging equipment in data centers around the world. The replacement process has only just begun, he said.
AI is taking over computer searches, helping companies streamline business processes, and is needed by countries to secure data, he said.
“It affects how each layer of computing is done,” Huang said.
