Nvidia CEO Jensen Huang didn’t need any prompting on Wednesday to address the elephant in the room. “There's been a lot of talk about an AI bubble,” he said on an earnings call before quickly getting to his main point: “From our vantage point, we see something very different.”
Huang went on to spend about five minutes trying to explain how the chipmaker, which has soared to become the world’s most valuable publicly traded company over the past three years, would be able to sustain unprecedented customer demand. His thesis is that AI is taking over the world, and Nvidia chips will be sorely needed to power that technological revolution underway. “All industries, across every phase of AI, across all of the diverse computing needs in a cloud, and also from cloud to enterprise to robots,” will need Nvidia’s products, Huang said.
The CEO’s pep talk ultimately drew mixed reactions from Wall Street. Nvidia shares have fallen about 10 percent in recent weeks after hitting an all-time high in late October. Shares budged up about 5 percent in after-hours trading on Wednesday after Nvidia reported record quarterly sales and Huang made his anti-bubble comments. But the increase was not enough to fully make up for the recent sell-off.
Nvidia has enjoyed three years of booming success since OpenAI debuted ChatGPT and caused a massive surge in demand for the company’s GPUs, which are used to train and operate generative AI systems. Nvidia dominates the global market for GPUs, and its latest releases have become highly sought after, with demand far exceeding supply. On Wednesday, Nvidia executives reiterated that it has about $500 billion in unfilled orders.
The company has used its newfound wealth to buy back its own shares and invest billions of dollars in AI companies, including top users and customers of its chips such as ChatGPT developer OpenAI, data center operator CoreWeave, and Elon Musk’s xAI, which develops the chatbot Grok.
Nvidia’s deals have fueled concerns among some investors that the company is unsustainably propping up sales. AI industry executives contend that partnering closely with Nvidia is crucial for getting access to chips and technical support, and that their revenues will eventually increase enough to fund their GPU purchases.
On Wednesday’s call, Huang addressed a financial analyst’s question about the rationale for investing in companies such as OpenAI. “The partnership that we have with them is one so that we could work even deeper from a technical perspective, so that we could support their accelerated growth,” Huang said. “I fully expect that investment to translate to extraordinary returns.”
He added that Nvidia this week had invested in OpenAI rival Anthropic “to have a deep partnership with them” and bring its Claude chatbot onto Nvidia chips for the first time. This parade of partnerships may not be ending any time soon. “The number of customers coming to us and the number of platforms coming to us after they've explored others, is increasing, not decreasing,” Huang said.
Demand in the most recent quarter propelled Nvidia to sales and profit of $57 billion and nearly $32 billion, respectively. Nvidia said it expects $65 billion in sales during the current quarter, exceeding the $62 billion estimate projected by Wall Street analysts.
While Nvidia has more than doubled its annual revenue each of the past two fiscal years, the company projects that growth will slow to 64 percent when the company’s current fiscal year ends in January.
Another concern among some investors is that electricity and supply chain constraints could slow down data center construction and curb Nvidia’s GPU sales in coming years. About 90 percent of Nvidia’s sales, which were once dominated by chips for personal gaming computers, now come from its data center business.
