Nvidia's Earnings Exceed Expectations, Easing Investors' Concerns

Global stock markets rose after Nvidia reported third-quarter earnings that exceeded Wall Street's expectations. This eased concerns for now about whether AI companies' high valuations have peaked.

All eyes were on Nvidia on Wednesday; as a harbinger of the AI industry and the world's most valuable publicly traded company, it was a day when analysts and investors hoped the chipmaker's third-quarter earnings could prevent a bubble from forming in the sector.

Nvidia founder and CEO Jensen Huang began the earnings call with the intention of dispelling those concerns, stating that a significant transformation is occurring in AI, and Nvidia is a cornerstone of that transformation.

Huang said, "There's been a lot of talk about the AI bubble. From our perspective, we're seeing something very different. Nvidia is very different from other accelerators. We excel in every phase of AI, from pre-training to post-training and inference."

Nvidia, as it had for many quarters, surpassed Wall Street expectations in nearly every area; this is a sign that the financially massive AI boom shows no signs of slowing down. The company reported earnings of $1.30 per share and total revenue of $57.01 billion, beating expectations of $1.26 per share and $54.9 billion in revenue. Sales increased by 62% year-over-year. The company generated $51.2 billion in data center sales, also surpassing expectations of $49 billion. The revenue forecast for the next quarter is approximately $65 billion; analysts expected the company to forecast $61 billion.

In discussions with investors, Huang noted three major platform shifts: the transition from general-purpose computing to accelerated computing; the shift to generative AI; and the move to agency and physical AI (such as robots or autonomous vehicles).

Huang said, "When evaluating infrastructure investments, keep these three fundamental dynamics in mind. Each will contribute to infrastructural richness. Nvidia is enabling these three transformations and doing it for AI in every form or mode."

Huang also added that demand for the company's chips continues to grow. "AI is spreading everywhere, doing everything, simultaneously."

Senior analyst Thomas Monteiro from Investing.com said, "This answers many questions about the state of the AI revolution, and the conclusion is simple: it has not peaked." Monteiro emphasized that despite investor concerns that increasing capital expenditures may slow companies' AI adoption cycles, Nvidia continues to prove that scaling data centers is now a central need for every technology business.

With analysts and experts feeling confident about Nvidia's ability to exceed Wall Street expectations, they were eagerly awaiting the earnings call for more insights into the state of industry demand for the company's AI chips. Senior analyst David Meier from The Motley Fool wrote, "There is no doubt about Nvidia's leadership in AI-focused chips. Therefore, I expect revenues, margins, and cash flows to be quite close to analysts' predictions. However, valuable insights are more likely to come from management's comments on market trends."

Nvidia's stock fell 7.9% after major investors sold the company's shares in November. Peter Thiel's Thiel Macro hedge fund sold all its shares of the chipmaker in the previous quarter, which were valued at about $100 million. SoftBank also sold $5.8 billion worth of the company's shares, further fueling concerns about an AI bubble.

Nvidia stock—now the world's first $5 trillion company—rose more than 5% in after-hours trading, while S&P 500 and Nasdaq futures also increased. Asian markets also rose following this news.

However, Stephen Innes from SPI Asset Management said, "Nvidia's latest forecast has softened the sharpest edges of AI bubble concerns in global markets for now... But don't be mistaken: it is still balancing on a market strung between AI enthusiasm and a reality burdened by debt."

Senior analyst Alvin Nguyen from Forrester stated, "I don't believe Nvidia's growth is sustainable in the long term. AI demand is unprecedented, but if supply meets demand or due to a slowdown in the pace of innovation, I expect the ongoing increase in Nvidia stock value to slow down."