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Nvidia shares jumped after the world’s most valuable chip company reported a 265% rise in quarterly revenue and forecast even stronger sales thanks to a frenzy of investment in artificial intelligence.
Revenue was $22.1 billion in the fourth quarter, far exceeding Wall Street expectations of $20.4 billion, Nvidia said Wednesday evening, adding that revenue for the current quarter is expected are equal to 24 billion dollars.
“Accelerated computing and generative AI have reached the tipping point,” said Nvidia founder and CEO Jensen Huang. “Demand is increasing around the world among businesses, industries and nations.”
Nvidia shares closed 16.4% higher at a record high of $785.38 on Thursday. The move led the company to leapfrog Amazon and Google parent Alphabet and become the third most valuable U.S. listed company behind Microsoft and Apple.
Nvidia has been the main driver of the S&P 500 rally this year, fueling about a quarter of the index’s gains. Its importance has become so great that some investors and analysts expected Wednesday’s financial report to carry market-wide risk similar to the release of inflation data.
Nvidia said earnings per share reached $4.93 in the fourth quarter, beating analysts’ expectations of $4.59, according to LSEG Estimates.
Net income increased 770% to $12.3 billion compared to the same period last year. The figure beat analysts’ expectations of $10.4 billion.
Nvidia, founded in 1993 as a supplier of graphics cards for computer games, has become a proxy for demand for artificial intelligence as Big Tech companies such as Alphabet, Microsoft, Amazon and Meta have all increased their investments in AI computing. Its leading chips, such as the H100, have become the industry standard for AI developers to process data for large language models. This has sparked a new industry known as generative AI, which generates chatbots and other software that can learn, understand and generate information in the form of text, images and video.
The rapid success of OpenAI’s ChatGPT helped make H100 chips the hottest product in Silicon Valley last year. Meta plans to bring its total stock of H100 chips to 350,000 in 2024, Chief Executive Mark Zuckerberg said in January. Supply rather than demand has become the main constraint on Nvidia’s growth in the near term.
“Nvidia has enabled an entirely new computing paradigm called generative AI,” Huang said on a call with investors on Wednesday. He said his prized chips are “essentially artificial intelligence generating factories” of a new industrial revolution.
“Every company relies on its own proprietary business intelligence and, in the future, its own proprietary generative AI,” he added. “Now every industry is on board.”
Big tech companies account for nearly 40% of Nvidia’s revenue, but its customers have diversified as more industries rush to invest in AI computing hardware. Huang said industries including automotive, financial services and healthcare are now spending on his chips “at a multibillion-dollar level.” He added that sovereign nations including Japan, Canada and France are becoming larger Nvidia customers as they leverage citizen data to create their own artificial intelligence models.
Nvidia’s data center division is the main driver of sales, generating $18.4 billion in revenue in the fourth quarter, up 409% from the same period last year. Gaming chips brought in sales of $2.9 billion.
Investors are paying close attention to Huang’s ability to maintain Nvidia’s stratospheric growth rates as its focus shifts to new products, such as its high-end AI chip, the B100, which is expected to start shipping later of the year.
The company also faces growing competition, including a move by some customers to develop their own AI chips, as well as in China, which once accounted for a quarter of revenue. New US export rules for the semiconductor industry have forced Nvidia to limit its product capabilities to continue selling in the region.
Although sales in China fell to a “single-digit percentage” of overall revenue, according to the company, its latest results were welcomed by analysts. Peter Garnry, head of equity strategy at Saxo Bank, said it was a “crazy” result. “I’ve never seen anything like this in my career. However, it will be increasingly difficult for Nvidia to beat expectations, and this could be the last crazy quarter.”
This article has been updated to correct Nvidia’s relative size compared to other public companies