Nvidia Corp, the chip giant at the heart of the artificial intelligence (AI) revolution, delivered solid but not spectacular quarterly earnings on Wednesday, leading to a subdued reaction from investors accustomed to record-breaking results.
For the fiscal first quarter ending in April, Nvidia projects sales of about US$43 billion (RM190.49 billion), slightly above analysts’ average estimate of US$42.3 billion. Some had even anticipated figures as high as US$48 billion.
However, the company warned that profit margins would be tighter than expected as it accelerates the rollout of its latest AI chip, Blackwell. Adding to concerns, potential US tariffs could further impact earnings. As a result, Nvidia shares dipped slightly in after-hours trading.
AI Market Faces Uncertainty
The AI industry is at a turning point. Nvidia shares have slipped this year due to fears that data centre operators might cut back on spending. The emergence of Chinese startup DeepSeek has also sparked concerns that AI models can be developed more affordably, reducing the demand for Nvidia’s powerful chips.
Although Nvidia executives addressed many of these concerns, the company is finding it harder to consistently exceed investor expectations. “Guidance was slightly underwhelming,” said Logan Purk, an analyst at Edward Jones. However, the early success of Blackwell should help reassure investors despite initial reports of production delays.
Nvidia’s Rapid Growth
Despite the challenges, Nvidia’s latest financial results reflect its extraordinary growth trajectory. The company generated US$11 billion in revenue from Blackwell in the fourth quarter alone, making it the fastest product ramp in Nvidia’s history. “Demand for Blackwell is amazing,” CEO Jensen Huang said.
Fiscal fourth-quarter sales reached US$39.3 billion, surpassing analysts’ estimates, though by the narrowest margin since early 2023. Meanwhile, profits of 89 cents per share, excluding certain items, narrowly beat Wall Street’s projection of 84 cents.
The stock, which soared in 2023 and 2024, has dipped by 2.2% this year, reflecting concerns about sustaining its meteoric rise. Nonetheless, Nvidia remains the dominant player in AI chips, doubling its revenue over the past two years as major tech companies continue to invest heavily in data centre infrastructure.
The Future of AI and Nvidia’s Role
Nvidia’s data centre division, its largest revenue driver, posted US$35.6 billion in sales, surpassing analysts’ estimates of US$34.1 billion. Gaming-related sales, once Nvidia’s core business, came in at US$2.5 billion—lower than the expected US$3.02 billion. Meanwhile, its automotive unit generated US$570 million in revenue.
Historically known for its graphics processing units (GPUs), Nvidia has become synonymous with AI computing. Its chips are crucial in training AI models and running complex inference processes that power applications like ChatGPT.
Heading into the earnings report, concerns loomed about whether Nvidia could sustain its rapid growth as it transitions to the Blackwell chip. The new technology is more advanced but poses manufacturing challenges. Additionally, DeepSeek’s recent AI model launch raised fears that AI computing could become more efficient, potentially reducing the need for Nvidia’s high-powered chips.
However, major customers like Microsoft continue to invest heavily in AI infrastructure, signaling that demand remains strong. Huang also downplayed concerns about DeepSeek, arguing that its approach to AI will ultimately increase the need for Nvidia’s products. He claimed that the fine-tuning process required for these AI models could exponentially increase computing power demand.
“The future of AI will require much more compute,” Huang said, describing DeepSeek’s model as “an excellent innovation.”
The Road Ahead
While Blackwell is expected to drive Nvidia’s future growth, its rollout has come with costs. The company acknowledged that expenses related to launching the new chip have weighed on profit margins. However, CFO Colette Kress reassured investors that cost efficiencies will improve over time, and gross margins should return to the “mid-70s” percentage by the end of the year.
For the current quarter, Nvidia expects gross margins of around 71%, slightly below analysts’ estimates.
Despite the hurdles, Nvidia has only missed revenue estimates once in the past five years. It has consistently outperformed expectations by more than 10% in recent quarters, setting a high bar for future performance.
“We think it will be challenging for management to continue significantly exceeding expectations for growth,” said Purk.
As Nvidia navigates this evolving landscape, its ability to maintain its AI dominance will depend on execution, innovation, and the continued expansion of AI adoption worldwide.
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