Nvidia: AI boom not dead yet
Nvidia delivered a robust first-quarter forecast on Wednesday, reaffirming surging demand for its artificial intelligence (AI) chips and easing concerns about a potential slowdown. The company highlighted strong orders for its next-generation Blackwell semiconductors, calling demand "amazing."
Nvidia's Q1 revenue outlook of $43 billion (±2%) surpassed the $41.78 billion consensus estimate from LSEG. Shares initially rose on the news before slipping in volatile after-hours trading, following a 3.7% gain during regular trading.
- AI Boom Powers Nvidia’s Growth
Nvidia, the biggest beneficiary of the AI stock rally, has seen its shares soar over 400% in two years. CEO Jensen Huang remained bullish, stating, "AI is advancing at light speed."
The company is transitioning to full AI computing systems with the new Blackwell architecture, integrating graphic chips, processors, and networking. In Q4, Nvidia generated $11 billion from Blackwell-related products—50% of its total data center revenue.
- Addressing Investor Concerns
Skepticism had grown after Chinese AI startup DeepSeek claimed to have developed cost-efficient AI models rivaling Western counterparts, leading to Nvidia's $593 billion market cap drop last month—the largest single-day loss for a U.S. company.
However, analysts believe the strong Q1 outlook "removed the doubts." Nvidia reported adjusted earnings per share of 89 cents, beating expectations of 84 cents, with Q4 revenue rising 78% to $39.3 billion, exceeding the $38.04 billion forecast.
- Data Center Strength & Market Demand
Data center revenue: $35.6 billion (up 93%), surpassing estimates of $33.59 billion.
Microsoft & Meta AI investments: $80 billion and $65 billion, respectively, despite speculation of potential oversupply in U.S. data centers.
Chinese companies ramping up orders for Nvidia’s H20 AI chips amid DeepSeek’s growing influence.
- Margin Pressures & Future Outlook
The Blackwell rollout, while promising, has higher costs, impacting margins. Nvidia expects Q1 gross margin at 71%, below Wall Street’s 72.2% forecast, but CFO Colette Kress assured margins would return to mid-70% later in the year as production scales.
Additionally, the U.S. Stargate data center project, announced by President Trump, will use Nvidia's Spectrum X ethernet networking technology, further strengthening its data center segment.
Despite recent AI market turbulence, "Nvidia's momentum with hyperscalers remains strong," said Third Bridge analyst Lucas Keh, pointing to sustained demand from major cloud providers.