Nvidia projects 70% sales growth next year as AI boom shows no sign of slowing

Nvidia on Wednesday forecast the AI-fuelled boom in demand for computing power will continue well into next year as the $5tn chip giant reported another quarter of strong sales.

The world’s most valuable company reported better than expected revenue of $96.2bn for the quarter to the end of July and forecast sales of about $108bn for the current quarter, beating Wall Street estimates of $104bn.

Chief financial officer Colette Kress said she expects strong growth to continue, forecasting a 70 per cent rise in sales next year. She said customer demand was set to double but revenue would be limited by supply constraints.

The projection, along with the announcement that Amazon Web Services has agreed to start deploying an additional 2mn of Nvidia’s latest GPUs starting this quarter, boosted the shares 4 per cent in after-hours trading.

Nvidia’s financial performance has become a bellwether for the health of the AI infrastructure boom because its advanced semiconductors are widely used to train and run models from start-ups such as Anthropic and OpenAI.

Data centre revenue, which relates to the company’s core AI chip business that has been the primary driver of its growth, was $89bn last quarter, up 117 per cent year-on-year.

Nvidia chief executive Jensen Huang emphasised the increasing number of companies beyond OpenAI that were contributing to demand for AI infrastructure. “This time last year, one lab alone was driving the build-out; today, we have a golden age of new AI labs and start-ups.”

Net income rose to $59.7bn, while gross margin was 75 per cent. But Nvidia said it expected a gross margin of about 74 per cent for the current quarter, slightly below the 75 per cent analysts expected.

Nvidia, like other tech giants including Apple, is dealing with higher costs from a widespread shortage of memory chips because of the demand from data centres. The chip group on Wednesday said its commitments with suppliers had increased to $279bn from $119bn in the previous quarter, “primarily related to the procurement of memory”.

It warned margins would fall further as the shortage intensifies, dropping as low as 71 per cent by early next year before improving.

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The robust earnings report comes as Huang faces greater investor scrutiny over how he has deployed more of Nvidia’s vast balance sheet to help its customers fund their AI infrastructure build-outs, offering financial backstops for projects by OpenAI and smaller data centre players known as neoclouds.

Huang has also mobilised outside capital. Earlier this month, Nvidia said it was working with a Wall Street consortium to assemble a $500bn funding package, enabling customers to access financing from groups including Apollo Global, KKR, Brookfield, BlackRock and Goldman Sachs.

Profits were boosted by paper gains on its stock investments, including a stake in SpaceX, which went public in June. Nvidia reported net gains from equity securities of $7.8bn for the quarter.

Nvidia remains largely frozen out of China’s market by strict US export controls and a backlash from Beijing against its products. It said during the quarter less than 1 per cent of its revenue from its older-generation Hopper chips — cleared for sale there under US export rules — came from China shipments.