Nvidia on Wednesday reported fiscal third-quarter earnings that beat expectations, and provided a strong forecast
Wall Street welcomed the report, and Nvidia stock rose after the release and during the conference call. Other stocks in the so-called artificial intelligence trade also saw a boost.
A closer look at Nvidia’s report shows that the company continues to dominate the market for AI chips called graphics processing units, or GPUs. CEO Jensen Huang also sounded confident in the company’s products and bullish on the company’s outlook during a call with analysts.
Nvidia said it expects about $65 billion in sales in the current quarter, which ends in late January. That would represent 65% growth on an annual basis.
Here are three key takeaways from Nvidia’s earnings:
Nvidia rejects bubble talk
On Wednesday’s earnings call with analysts, Huang began his comments by rejecting the premise of an “AI bubble” held by some investors who are concerned about the billions of dollars being spent on Nvidia chips and potential return on investment.
“There’s been a lot of talk about an AI bubble,” Huang said. “From our vantage point, we see something very different.”
Huang said there were three different kinds of uses for AI that are currently growing and that all three are contributing to the boom in infrastructure investments.
He said that non-AI software, like software for data processing, was increasingly being run on the company’s GPUs; that AI will create new kinds of apps; and that “agentic AI,” which doesn’t need user input, will require additional computing power.
Huang said that people will soon start appreciating what’s happening underneath the surface of the AI boom, versus “the simplistic view of what’s happening to capex and investment.”
Bernstein analysts said in a note that Huang’s comments helped settle investor fears of a bubble after a recent pullback in AI names, saying “perhaps the AI trade is not yet dead after all.”
“More than just good numbers, we believe investors needed some hand-holding from Jensen which he provided in spades,” the analysts wrote.
‘Half a trillion’ forecast is on track
Last month, Huang said at a conference in Washington, D.C., that his company had orders for $500 billion in AI chips in 2025 and 2026.
On Wednesday, Nvidia said that the forecast was still on track. Any long-term outlook from Nvidia is important to the technology industry because Nvidia counts many of the most powerful technology customers as customers.
Nvidia said on Wednesday that its order backlog didn’t even include a few recent announcements, like the company’s deal with Anthropic or the expansion of a deal with Saudi Arabia this week.
“The number will grow,” CFO Colette Kress said on the call, saying the company was on track to hit the forecast. “We’ll probably be taking more orders.”
“We see the opportunity to grow for quite some time,” Huang said.
Several analyst notes on Thursday called attention to the $500 billion forecast and the addition of the recently announced deals.
Jefferies said Nvidia “answered the bell” in its earnings report and said the numbers should help steady the AI trade into the end of the year.
“We don’t expect every AI bear to be satisfied, but these results and added context from management around demand outlook should offer some near-term reprieve,” the analysts wrote.
‘Insignificant’ China orders
Nvidia fought over the summer to gain licenses to export its H20 chip — a slowed-down version of 2022 technology — to China. Some analysts projected the China business could be worth $50 billion per year to Nvidia.
The company eventually got the licenses this summer after Huang personally met with President Donald Trump and struck a deal to give the U.S. government 15% of China sales.
But it turns out that H20 chip sales during the quarter were “insignificant.” Kress told analysts that the company recorded $50 million in H20 sales during the period.
“Sizable purchase orders never materialized in the quarter due to geopolitical issues and the increasingly competitive market in China,” Kress said.
Nvidia has argued that the U.S. government should allow exports of the most advanced chips because it’s better for national security if Chinese developers get used to Nvidia technology, rather than being forced to use Chinese chips and make them better.
The H20 is old technology, but Nvidia wants to gain approval to send a version of its current-generation Blackwell chip to China.
“While we were disappointed in the current state that prevents us from shipping more competitive data center compute products to China, we are committed to continued engagement with the U.S. and China governments and will continue to advocate for America’s ability to compete around the world,” Kress said.
Analysts at Melius said Thursday that the lack of China sales made the numbers “all the more extraordinary” and projected Nvidia would generate nearly $400 billion in free cash flow over the next nine quarters.
“Currently Nvidia isn’t delivering to China and we are not counting on this situation to get straightened out,” the firm said.
— CNBC’s Samantha Subin contributed to this story.
