Chip designer Nvidia Corp (NVDA.O) forecast first-quarter revenue above Wall Street estimates on Wednesday as its CEO said use of its chips to power artificial intelligence (AI) services like chatbots had “gone through the roof in the last 60 days.”
The sales outlook drove Nvidia’s shares up 8% in extended trading. The world’s largest supplier of chips used in data centers for training AI has become a key hardware supplier for large tech companies such as Microsoft Corp (MSFT.O) that are building services like chat-powered search engines.
Analysts believe that Nvidia, more than any other company, is best positioned to benefit from such increased costs as it dominates roughly 80% of the market for graphics processing units, or GPUs, used to speed up AI work.
AI is still “not deployed in enterprises broadly, but we believe that by hosting everything in the cloud, from the infrastructure through the operating system software, all the way through pre-trained models, we can accelerate the adoption of generative AI in enterprises,” Huang said.
Revenue in the quarter ended Jan. 29 was $6.05 billion, compared with analysts’ average estimate of $6.01 billion.
“The launch of generative AI models and the AI arms race taking place should drive accelerated adoption of the company’s new H100 products,” said Logan Purk, an analyst with Edward Jones.
Nvidia’s outlook also helped boost the share prices of competitors such as Advanced Micro Devices (AMD.O), whose stocks were up 3% after Nvidia’s results.
The Santa Clara, California, company got its start in the graphics chip business for PCs by helping video games look more realistic. While its revenue beat Wall Street expectations, Nvidia’s sales were still down overall year-on-year as the company weathers a downturn in the PC market.
But growth has remained brisk in the market for data center chips. Analysts at Bank of America Global research believe the boom in so-called generative AI like chatbot and image creation services could add $14 billion more to Nvidia’s revenue by 2027.
Nvidia’s revenue from the data center business was $3.62 billion for the fourth quarter, slightly below analyst estimates of $3.84 billion. Gaming chip sales were $1.83 billion, beating analyst estimates of $1.52 billion, according to Refinitiv data.
Adjusted profit was 88 cents per share for the fourth quarter, beating analyst estimates of 81 cents.
