Nvidia’s optimistic forecast eases fears of an AI stock market bubble

New York: Nvidia delivered a surprisingly strong revenue forecast and pushed back on the idea that the AI ​​industry is in a bubble, easing concerns that had spread across the technology sector. The world’s most valuable company expects revenue of about $65 billion in the January quarter – roughly $3 billion more than analysts had forecast. Nvidia also said the half-trillion dollar revenue bonus expected in the coming quarters could be even bigger than expected.

The outlook indicates that demand remains robust for Nvidia’s artificial intelligence accelerators, the expensive and powerful chips used to develop AI models. Nvidia has faced growing fears in recent weeks that its runaway spending on such equipment was not sustainable.“There’s a lot of talk about an AI bubble,” CEO Jensen Huang said on a conference call with analysts. “From our point of view, we see something completely different.”

The upbeat commentary sent shares up about 5.4% in early trading Thursday before markets opened in New York. This year, they had posted a 39% gain at the close, leaving the company’s market value at $4.5 trillion.

Nvidia’s results have become a barometer for the health of the AI ​​industry, and the news sent a number of related stocks surging. AI computing provider CoreWeave gained more than 9% in extended trading. Sector peer Nebius Group NV climbed more than 8%. Benchmarks in South Korea, Taiwan and Japan rose, thanks to Nvidia suppliers including Taiwan Semiconductor Manufacturing Co and Tokyo Electron. “Markets are reacting very positively to the news that there is no sign of a slowdown in AI momentum,” Brian Mulberry, senior client portfolio manager at Zacks Investment Management, said in a note. His company owns Nvidia stock. “Demand for Nvidia hardware solutions remains strong,” he said. Nvidia’s CEO said last month that the company will generate more than $500 billion in revenue in the coming quarters. Large data center owners will continue to spend on new equipment as investments in AI begin to pay off, he said.

Chief Financial Officer Colette Kress went further on Wednesday, indicating that Nvidia would likely eclipse the $500 billion target.

“There is certainly an opportunity for us to get more on top of the $500 billion that we announced,” she said on the conference call.

“The number will grow.” The growing role of AI will help maintain demand for Nvidia products, Huang said. The technology helps speed up existing computing work, such as searching. And it’s about to come to the physical world in the form of robots and other devices.

Nvidia’s third-quarter results also exceeded analyst expectations. Sales rose 62% to $57 billion in the period ending October 26. Earnings were $1.30 per share. Analysts had forecast revenue of $55.2 billion and earnings of $1.26 per share. Nvidia’s main data center unit had revenue of $51.2 billion in the quarter, compared with an average estimate of $49.3 billion.

Chips used in gaming PCs – once the company’s main source of revenue – generated sales of $4.3 billion. That compares to an average estimate of $4.4 billion. The forecast for the latest quarter reflects a dizzying run for the company. Turnover will be more than ten times higher than in the same period three years ago. And Nvidia is on track to generate more annual net income than two longtime rivals – Intel Corp and Advanced Micro Devices – will report in revenue.

But Nvidia’s expansion has faced challenges. U.S. restrictions on shipments of advanced chips to China have largely shut Nvidia out of a huge market for its products. Huang has lobbied Washington to roll back those rules, arguing they are counterproductive to the national security concerns they are intended to serve.

But even after rolling back the toughest elements, Nvidia currently doesn’t expect any sales from AI accelerators in China. “Our forecast for China is zero,” Huang said in a Bloomberg Television interview.

“We would like the opportunity to address the Chinese market again with excellent products.” Some investors have also raised concerns about the structure of the mega deals Nvidia has made with customers. The transactions include investments in startups such as OpenAI and Anthropic PBC, raising questions about whether the pacts create artificial demand for computers.

Earlier this week, Nvidia and customer Microsoft Corp said they had committed to investing as much as $15 billion in Anthropic. The startup has also pledged to buy $30 billion in computing capacity from Microsoft’s Azure cloud service and will work with Nvidia engineers to refine chips and AI models.

During the conference call, Huang was asked about the deals with OpenAI and Anthropic. Huang said Nvidia’s investment in OpenAI, which is still ongoing, will yield good returns, he said. Backing Anthropic, meanwhile, will help build ties with a company that hasn’t been a big user of Nvidia’s technology, he said.