Since ChatGPT grabbed the world’s attention late last year, tech companies have been hyping the technology’s ability to make them much richer — but without putting an exact dollar figure on it.
At least until Nvidia Corp. reported earnings on Wednesday.
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Chief Financial Officer Colette Kress stunned Wall Street with guidance for a record $11 billion in quarterly revenue Wednesday afternoon, a sales total that the company did not surpass in a full year for the first 25 years it was public. Shares soared 25% in after-hours trading, adding nearly $200 billion in market cap and putting Nvidia closer to a rare $1 trillion valuation as Kress joined MarketWatch for an interview and defended the AI hype.
“When you talk about ‘Let me see it, let me see generative AI,’ we can see it, we know what the customers are building, we know the models they are building, the use cases they are building, we are here to help them do that,” Kress said.
Kress said that generative AI, as well as a move toward accelerated computing, were the “two different themes” that led to the eye-popping revenue prediction, which would top Nvidia’s annual revenue totals for every year prior to fiscal 2021. While the move toward accelerated computing has been ongoing for years, generative AI is more recent, and was described as the “killer app” of artificial intelligence by Kress and Chief Executive Jensen Huang on Wednesday’s analyst call after earnings.
“It is the app of all apps, whether you are an enterprise, a [cloud services provider], or a pioneer building large language models, you can visualize how to use generative AI, and the underpinnings of generative AI is our platform,” Kress told MarketWatch.
When asked if she could break down how much of the company’s forecast is coming from generative AI, Kress declined to provide that information, but she did say that “Generative AI can absolutely be looked at as one of the key drivers of this step up.”
She also said it was not driven just by the largest corporate customers, contending that three types of customers are pretty much evenly split in their demands for both generative AI and accelerated computing, which is adding more graphics processing chips to data centers. Those three segments are cloud services providers, or CSPs, like Microsoft Corp.
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Amazon.com Inc.
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and Alphabet Inc.
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; large consumer internet providers such as Facebook parent company Meta Platforms Inc.
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; and corporate enterprises.
The forecast suggests a sudden leap in sales — Nvidia reported quarterly revenue of $7.19 billion for the fiscal first quarter, and analysts on average were forecasting roughly that same amount for the fiscal second quarter ahead of Wednesday’s report. And it arrives at the end of a whiplash-inducing period for semiconductor companies — after demand greatly exceeded supply early in the COVID-19 pandemic, inventory channels had been overrun, leading to three straight quarters of revenue declines for Nvidia.
Now Nvidia faces yet another demand spike as tech companies seek to build their own pet projects with generative AI. Kress said the company has enough supply to meet the growing demand, as it has been working on expanding its global supply chain since the huge issues in the early stages of the pandemic, while neglecting to spell out whether the sales leap will also expand into future quarters.
“We have procured a substantial supply for the second half of the year,” Kress said. “We have better visibility for a few quarters out. That is about as much as we can articulate now. But the driver that we are seeing is generative AI.”
Many on Wall Street have noted in recent months that Nvidia is among the best-positioned companies to reap the potential rewards of generative AI in the wake of the ChatGPT boom, but even analysts who follow the company closely were stunned by the forecast.
As many have pointed to generative AI and ChatGPT as the “iPhone moment” for artificial intelligence, which has been around for decades, Kress agreed that the “inflection point of AI is here.”
“It’s put us in a spotlight that we understood would happen,” Kress said. “But it’s just very difficult to determine when that possibility would be there. But it is here, this inflection is here, the inflection on AI and the inflection on AI and accelerated computing.”
That doesn’t sound much different from the pronouncements we have heard from tech executives for the past few months about the newest use of AI that has both captivated and scared consumers and companies alike. The difference is that Kress literally put Nvidia’s money where her mouth is by spelling out some really big numbers for investors.
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