AI chip giant Nvidia crushes expectations as profits soar

SAN FRANCISCO – US chip giant Nvidia, whose products play a crucial role in artificial intelligence systems, crushed expectations on Wednesday, as the AI frenzy continues to lift the tech sector.

The Silicon Valley-based company said sales doubled year-on-year to US$13.5 billion (S$18.3 billion) in the latest completed quarter, driving net profit to US$6.2 billion – an eye-watering 843 per cent higher than a year before.

Signaling that the boom in AI is still going strong, Nvidia said revenue in the current quarter would ramp up further to US$16 billion.

“The entire tech sector and overall market was waiting for Nvidia with this being the purest and best barometer for AI demand,” said Dan Ives of Wedbush Securities.

In the end, the earnings “were a ‘drop the mic’ moment that will have a ripple impact for the tech space for the rest of the year,” he said.

Nvidia’s stock rose more than 8 per cent following the results. This year, the company’s share price has more than tripled.

Nvidia’s quintessential position in delivering artificial intelligence has made it a bellwether on the generative AI frenzy that took hold of the tech world after the release of ChatGPT late last year.

As the wave began to build, the company already wowed Wall Street with spectacular earnings earlier in the year, lifting Nvidia to become a trillion dollar company based on market capitalisation, a rare perch shared only by a handful of companies.

Nvidia manufactures graphics processing units (GPUs), a powerful chip technology that is necessary to build the AI that delivers ChatGPT as well as image, facial and speech recognition.

The company also offers AI-focused computers and services making it an unparalleled one-stop shop for AI.

Originally designed for video game graphics, each of Nvidia’s GPU chips cost tens of thousands of dollars and companies are scrambling to stock up as the pressure to keep up with the AI revolution grows.

Supply crunch?

Customers have struggled to get their hands on Nvidia’s AI chips as startups, big companies, governments and cloud providers ramp up orders and hoard stock.

Elon Musk, who this year started his own AI company, has said that GPUs “are considerably harder to get than drugs” at the moment, with buyers even looking to buy components from struggling cryptocurrency companies that also use GPUs.