Nvidia, Salesforce Are in Spotlight This Week

Some of the hardest-working people in tech right now have to be the corporate communications folks at Nvidia, which is pretty much never out of the news. Aside from updates on its latest AI chips, Nvidia seems to be investing in almost every part of the AI sector, from data center developers to AI model makers to data-labeling providers. And this week, we get Nvidia’s second-quarter earnings, which will help explain how the company can afford to do everything it’s doing.

In truth, its trajectory continues to be extraordinary. After revenue growth slowed to 65% in its last fiscal year, from 114% the year before, Nvidia’s growth is now accelerating—analysts expect revenue this year to grow 83%, according to S&P Global Market Intelligence. And Nvidia is expected to report this week even faster growth, of 97%, for the July quarter.

That would compare with 85% growth in the first quarter. What’s going on? Most obviously, the AI boom has underwritten an explosion in data center development, much of which is leading to intense demand for Nvidia’s AI chips. That’s coming from big tech companies such as Alphabet and Amazon building out more data centers, neoclouds like CoreWeave and Nebius, and data center developments funded by private equity. Meanwhile, more businesses are using AI models for various purposes. That’s helped boost Nvidia’s share of chips for the inference market —inference is running existing models, as opposed to training them—.

And while Nvidia’s costs are going up—memory chip prices are rising, for instance—Nvidia is also raising its prices as we reported on Saturday. The net effect is that Nvidia has become an enormous cash machine. Its free cash flow—what its business generates in cash after capital expenditures are taken into account—rose 85.7% to $48.6 billion in the first quarter. Analysts project Nvidia will report about the same level of free cash flow for its second fiscal quarter, although they also expect free cash flow will rise to $55 billion in the third quarter and $61 billion in the fourth quarter. That would amount to $213 billion for the year. Apple, long a giant in cash production, is expected to generate just $144 billion in its 2026 fiscal year, S&P data shows.

It’s little wonder, then, that Nvidia can afford to both buy back shares and invest billions in a wide range of companies. It’s no coincidence that this is occurring as companies like Alphabet, Meta and Amazon all become cash-burning giants, thanks to massive capex. You can practically see the dollar bills shifting from those big tech names into Nvidia’s pocket.

Salesforce’s Update

We’ll get another perspective on the AI boom from enterprise software firm Salesforce reports on Wednesday—the same day as Nvidia. Salesforce’s growth rate, of course, is much more sedate—the company has projected growth of between 10% and 11%. For the full year, it projects 11% growth, which would be a modest improvement on its last fiscal-year increase of 9.6%.

As slow as that is, the fact that Salesforce is growing at all is notable, given how worries about the impact of AI on its business have crushed its stock price this year, as for most other software companies.

There’s no question cheaper AI-enabled alternatives are affecting Salesforce and other firms. We reported earlier this month on how the U.S. Agriculture Department was reducing its use of Salesforce as it turned to other suppliers using AI for certain tasks.

Still, Salesforce has been reporting strong growth in its own AI products. How this all shakes out will take years to be clear. This week’s quarterly update is a milestone worth checking out.

• The Department of Justice said Friday that TikTok and its parent company ByteDance have agreed to pay $400 million to settle a lawsuit regarding their alleged violation of federal children’s privacy laws.

• Kaylin Voss, OpenAI’s vice president of sales in the Americas, has resigned a week after her former boss, Denise Dresser, left the company, according to a person familiar with the matter. Voss had been at OpenAI for just five months. Dresser, who was chief revenue officer, had left after nine months at OpenAI.

• Marc Stad, the founder of Dragoneer Investment Group, is buying a controlling stake in the Minnesota Timberwolves and Minnesota Lynx professional basketball teams, according to The New York Times’ Athletic publication.

• OpenAI has announced an integration with Apple Messages on the Mac that allows ChatGPT to read, search and send messages. Mac users will be able to ask ChatGPT to analyze users’ messages, such as who are their most frequent contacts.

• Alibaba Group said Sunday that it is looking to raise 80 billion Hong Kong dollars ($10.2 billion) through a major share placement to fund its fast-growing AI investments.

Friday on The Information’s TITV

Check out Friday’s edition of The Information’s TITV where we assessed the security practices of top AI labs.