Chipmaker Nvidia reported its latest financial results on Wednesday, recording $30.04bn in revenue over the past three months – a 122% jump from the year prior – and showing that artificial intelligence investment mania shows no signs of cooling.
The importance of Nvidia’s earnings results to Wall Street can hardly be overestimated – the company represents 6% of the total value of the S&P 500, currently the third most valuable company in the world by market capitalization at $3.1tn.
The index has gained 27% over the past 12 months, but Nvidia is individually up 167% over the same period. But because big tech is driving US stocks to new record highs, and because spending on Nvidia is seen as a signal of future tech earnings, Nvidia’s results are a key barometer of the US stock market.
The company also reported $0.68 in earnings per share and announced a $50bn stock buy-back. Analysts had anticipated about $28.7bn in revenue and $0.64 per share for the quarter, compared to $13.5bn in revenue a year earlier. Profits were seen at $15.1bn, up from about $6.2bn a year earlier.
The company’s last earnings, released in May, showed quarterly growth of 18% and annual revenue growth of 262%. Against that extraordinary precedents, anything less than a repeat could be seen as a disappointment.
Recent earnings reports from Nvidia’s main big tech customers, Microsoft, Amazon, Meta, and Google, which use the company’s chips to build and train their own AI models, indicated higher capital spending as AI demand continues to rise.
Wedbush analyst Dan Ives expected a “showstopper performance” and called Nvidia’s earnings call “the most important week for the stock market this year and potentially in years”. Ives estimates that for every $1 spent on an Nvidia GPU chip, there is a $8-$10 multiplier across the tech sector.
“In a nutshell, we expect another drop-the-mic performance from Nvidia, as right now Jensen & Co are the only game in town with $1tn of AI Cap-Ex on the way for the next few years with Nvidia’s GPUs the new oil and gold in this world,” he added.
The expectations are so high, in fact, that Ameriprise Financial’s Anthony Saglimbene told Bloomberg that the results could have more impact on the overall market than Federal Reserve chair Jerome Powell’s speech last week at Jackson Hole, Wyoming.
But placing so much emphasis on a single stock itself rests on the concept that AI will boost global productivity over the coming decades.
The enormous $100bn annual investment into AI has yet to translate into profits for big tech, and its not yet clear when they will arrive. Conversely, a disappointing set of results could leads to doubts – and that we are at peak AI hype.
That’s led to comparisons to the late 1999 Internet bubble when the sector crashed but later recovered as the online world we know today on its skeletal remains.
In his market hand-holding mode, Ives said in a note that investors may worry about the huge spending, but the circumstances are more like 1995, when investment was pouring into the internet’s infrastructure, and not like 1999 when the bubble burst.
“Tech earnings season has only bolstered and validated this bullish view of tech stocks heading into year-end and 2025,” Ives says.
But lingering concerns remain. Nvidia has told customers that its next-generation AI chips, code-named Blackwell, will be delayed several months from January.
As with Microsoft in the early 2000s, regulators are hovering over Nvidia. Earlier this month, the US Department of Justice launched an antitrust investigation into the tech giant. Rival chipmakers have alleged the company has abused its market dominance to corner the market and coerce its customers into continuing to purchase its products.