Demand for AI Chips Drives Nvidia to Revenue Record in Q2

Nvidia announced Q2 revenue of $13.51 billion, a 101 percent year-over-year increase that sets a new company record. The data center division — which accounts for the majority of AI chip sales — also established a new benchmark: $10.32 billion in Q2, a 171 percent leap over the prior fiscal Q2. Nvidia projects that revenue for the current quarter will hit $16 billion — about $3.5 billion above analysts’ expectations. Nvidia chips power OpenAI’s popular ChatGPT and other generative AI and cloud computing apps from companies including Amazon, Google, Meta Platforms, Microsoft and VMWare.

“Nvidia is at the heart of the boom in artificial intelligence that made it a $1 trillion company this year, and it is forecasting growth that outpaces even the most bullish analyst projections,” The Wall Street Journal reports.

Net profit for Q2 was $6.19 billion, which translates to an adjusted gross margin of 71.2 percent (+25.3 percent in profit). “Nvidia has invested in making chips and software for AI for more than a decade and has no competitors who can yet match it,” notes WSJ.

The AI surge is due primarily to Nvidia’s data center division, which includes big data, model training and cloud computing. But Nvidia also sells AI-optimized GPUs through its gaming and automotive units.

“The gaming division, which used to be Nvidia’s core business, saw revenue increase 22 percent from a year earlier to $2.49 billion, topping the $2.38 billion average estimate,” according to CNBC.

“Nvidia’s stock, already the top performer in the S&P 500 this year, rose 7.5 percent following the results,” which WSJ says translates to about $87 billion in added market value. “Even before Wednesday’s report, Nvidia’s stock price had more than tripled for the year,” says CNBC.

The New York Times calls Nvidia’s stellar results and “lofty market cap” a “symbol for the growing exuberance surrounding AI,” pointing out that chip makers are often bellwethers for the broader tech sector.

“A new computing era has begun,” Nvidia founder and CEO Jensen Huang said in a news release. “Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI.”

Nvidia Plans to Triple Production of Its $40,000 Chips to Meet AI Demand, Business Insider, 8/23/23
How Nvidia Built a Competitive Moat Around AI Chips, The New York Times, 8/21/23
Nvidia Warns Semiconductor Curbs Will End U.S. Chipmakers’ Ability to Compete in China, CNBC, 8/24/23

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