Nvidia: AI Boom Not Dead Yet

Nvidia issued a strong forecast for the first quarter on Wednesday, confirming a continued high demand for its artificial intelligence (AI) chips and alleviating worries about a slowdown in growth.

The company reported that it has received impressive orders for its next-generation Blackwell semiconductors, describing the demand as "amazing." Nvidia's revenue outlook for the first quarter stands at $43 billion (±2%), which exceeds the consensus estimate of $41.78 billion from LSEG. Following this positive news, shares initially experienced an uptick but later dropped in volatile after-hours trading, after a 3.7% increase during the regular trading day.

AI Boom Powers Nvidia’s Growth

Nvidia has become the main beneficiary of the recent AI stock surge, seeing its shares increase by over 400% in just two years. CEO Jensen Huang expressed optimism, noting, "AI is advancing at light speed." The company is moving towards full AI computing systems utilizing the new Blackwell architecture, which integrates graphics chips, processors, and networking. In the previous quarter, Nvidia generated $11 billion from products linked to Blackwell, representing 50% of its total data center revenue.

Addressing Investor Concerns

Concerns had emerged following claims from the Chinese AI startup DeepSeek, which announced that it developed cost-effective AI models comparable to their Western rivals. This led to a significant market cap drop of $593 billion for Nvidia last month, marking the largest single-day loss for a U.S. company. However, analysts believe that Nvidia's strong first quarter forecast has alleviated these doubts. The company reported adjusted earnings per share of 89 cents, surpassing expectations of 84 cents. Moreover, its revenue for the fourth quarter grew by 78% to $39.3 billion, exceeding the forecast of $38.04 billion.

Data Center Strength & Market Demand

Nvidia's data center revenue was $35.6 billion, a remarkable increase of 93%, surpassing estimates of $33.59 billion. Investments in AI from major companies like Microsoft and Meta amounting to $80 billion and $65 billion, respectively, continue despite speculation about potential oversupply in U.S. data centers. Additionally, Chinese companies are increasing their orders for Nvidia's H20 AI chips amid the rising influence of DeepSeek.

Margin Pressures & Future Outlook

While the rollout of the Blackwell architecture promises future growth, it does come with higher costs, which may impact profit margins. Nvidia anticipates a gross margin of 71% in the first quarter, slightly below Wall Street's expectation of 72.2%. However, CFO Colette Kress assured that margins would likely return to the mid-70% as production ramps up over the year. Furthermore, the U.S. Stargate data center project, which was announced by President Trump, will utilize Nvidia's Spectrum X ethernet networking technology, thereby further enhancing its data center segment. Despite the recent turbulence in the AI market, noted analyst Lucas Keh from Third Bridge emphasized that "Nvidia's momentum with hyperscalers remains strong," indicating ongoing demand from major cloud service providers.

Nvidia, AI, Growth