Nvidia Announces Threefold Sales Increase in Another Stunning Earnings Report – ‘We’re Racing Every Day,’ Says CEO Jensen Huang

Markets breathed a sigh of relief after Nvidia’s long-awaited earnings report far exceeded expectations, with revenue rising a staggering 262% year-over-year, sending Nvidia’s stock price to an all-time high of $1,017 after market close. Driven by massive demand for artificial intelligence, the chipmaker also announced a 10-to-1 stock split, which will make shares more accessible to retail investors and could further boost share prices.

“The industry is going through a major change,” Nvidia CEO Jensen Huang said on Wednesday’s earnings call. “The next industrial revolution has begun. Companies and countries are working with Nvidia to move a trillion-dollar installed base of data centers to accelerate computing and build a new type of data center, artificial intelligence factories, to produce a new commodity, artificial intelligence.

Nvidia shares have been falling over the last year: they are up 200% in the last 12 months and 87% since the beginning of 2024. The explosive growth has catapulted it to the third-largest market capitalization in the world, above peers including Amazon and Meta. “The most important stock on planet Earth,” according to Goldman Sachs, helped lift the entire S&P 500 index to all-time highs, and another earnings surge is a positive sign that Nvidia has no intention of slowing down any time soon.

Demand for Nvidia’s electrical circuits, known as graphics processing units (GPUs), and data centers is “incredible,” Huang said. This phenomenon is largely due to applications like ChatGPT and GPT-4, as well as the growing class of AI startups, which Huang says includes between 15,000 and 20,000 companies. That doesn’t include companies focusing on autonomous cars, digital character design and biotech companies, he said, which has led to even greater customer needs.

“We race every day,” Huang said. “Customers are putting a lot of pressure on us to deliver systems and get them up and running as quickly as possible.”

Over the past year, Nvidia has had no problem beating high expectations: It beat earnings per share estimates by an average of 20% over the previous four quarters before Wednesday’s launch. So ahead of the earnings report, Wall Street expectations were lofty, with analysts predicting revenue of $24.65 billion. However, the $26 billion reported by Nvidia was good considering Nvidia’s 5.5% increase in data center revenue, which makes up the majority of its overall revenue. It was $22.6 billion for the quarter, higher than Wall Street estimates of $21.13 billion and up 427% from the same period last year. Following the earnings release, Nvidia’s share price rose as much as 4.4% in secondary market trading, surpassing the $1,000 mark for the first time on an earnings call.

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“If 10 was a shockingly good (score) on the plus side, I would give it a seven or eight,” said tech investor and The Citadel finance professor Paul Meeks Fortune.

While Nvidia’s 10-to-1 stock split doesn’t have a direct impact on its valuation, Meeks says making the stock cheaper and more accessible to retail investors is a smart move. Nvidia shares are currently valued at around $950, which means that after the June 7 stock split, investors will likely be able to pick up shares for under $100.

“Stock splits are cosmetic… But when you get the stock price down to about $100 a share and everyone on Earth knows it’s a stock of a leading technology company… I think there’s probably a buy-now push for some retail investors,” Meeks said. “Overall, definitely a plus.”

The source of Nvidia’s dominance is its enormous advantage in the AI ​​hardware market. Nvidia pioneered the development of graphics processors, specialized computer chips that it initially used for gaming, but then, as the artificial intelligence sector exploded, it pivoted to a market for AI developers.

Nvidia’s hardware play is backed by deep investment in software: its CUDA programming interface, which runs exclusively on chips, is a necessity for many AI developers and a key reason it has been able to defend its near-monopoly position in the AI ​​space.

Nvidia’s growth is being driven by relentless demand: the company is forced to choose who gets the chips first as everyone from data center operators to startups and Big Tech scramble to get their hands on AI computing power, especially its top-of-the-line Blackwell and H200 chips. whose sales, according to the company, are expected to begin next quarter.

“Blackwell is in full production… Demand for the H200 and Blackwell significantly exceeds supply, and we expect demand could exceed supply well into the last year,” Nvidia CFO Colette Kress said on the earnings call.

“We will see strong revenues for Blackwell this year,” Huang added. And “after Blackwell there is another chip.”

Nvidia’s activities outside of developing AI chips have been relative. The gaming division, once the core of its business, posted revenue of $2.6 billion, down 8% from the previous quarter. Its automotive division saw revenue growth of $329 million, but Nvidia’s other business lines pale in comparison to its investments in making AI chips.

However, since the beginning of this year, Nvidia’s rivals have been intensifying competition in the AI ​​hardware space. Intel, with $8.5 billion in CHIPS Act funding, released its Gaudi 3 AI chip last month to compete with Nvidia’s top-of-the-range Blackwell model. Big Tech AI developers including Google and Microsoft have announced that they are designing their own AI chips to reduce dependence on Nvidia and cut costs.

“It’s a combination of some large companies saying, ‘We’re going to develop our own AI chips,’ and other industries saying, ‘We’re going to do it locally on our smaller devices, with less power consumption’ – that in the long run may be what makes it difficult for them to development,” said Edward Wilford, an analyst at the technology consulting company Omdia Fortune.

Nvidia’s business model is not fully vertically integrated: as a chip designer, it creates semiconductor models, but outsources the actual production of its most advanced chips to TSMC, the Taiwanese giant that produces more than 90% of the world’s advanced chips. Frosty U.S.-China relations and the recent earthquake in Taiwan that briefly closed TSMC’s headquarters have unnerved some Nvidia investors – any significant disruption to TSMC’s operations would be a major blow to the entire semiconductor supply chain.

“They will be very aware of how vulnerable they are to TSMC and supply disruptions. They will be watching this closely,” Wilford said. “This is a company that can’t just be moved from one area to another… They want to make sure it’s protected at all costs. “It’s going to be something that’s going to keep some people up at night.”

This story was originally published on Fortune.com