Nvidia Soars in Revenue Amid AI Demand, Stock Dips Over Trade Concerns
Nvidia continues to ride high amid a boom in demand for the artificial intelligence (AI) chips it designs, which has led to major jumps in revenue and net income. The tech giant saw its revenue increase by 206% year-over-year and 34% from the prior quarter to over $18 billion, surpassing analysts’ estimates for the company’s third quarter of its 2024 fiscal year. Its net income also rose significantly, increasing 49% from the prior quarter and a remarkable 1,259% year-over-year to $9.2 billion.
“Our strong growth reflects the broad industry platform transition from general-purpose to accelerated computing and generative AI,” said Jensen Huang, founder and CEO of Nvidia. “Large language model startups, consumer internet companies, and global cloud service providers were the first movers, and the next waves are starting to build.”
However, one headwind facing Nvidia comes in the form of the U.S. government’s export controls. Restrictions announced this year by the Biden administration on exports of advanced chips to certain countries, including China and other nations of concern, have raised concerns about the impact on Nvidia’s business.
Specifically, the restrictions require the company to obtain a license from the Commerce Department to sell certain advanced chips to these countries, which includes but is not limited to Saudi Arabia, the United Arab Emirates, and excludes Israel.
As a result of these export controls, Nvidia is planning to introduce new products in the months ahead that comply with these regulations to allow it to continue selling AI chips to affected countries. However, the company acknowledged that it expects a significant decline in its sales to these destinations in the fourth quarter of fiscal 2024.
Despite concerns about trade restrictions, Nvidia’s stock has seen significant growth throughout the year, up over 248% in 2023 to date. However, the stock dipped slightly during Tuesday’s trading, falling about 1.4% in after-hours trading.
While Nvidia’s earnings report showed a massive surge in revenue and net income, the potential emergence of a new AI chip competitor did not come up during the company’s earnings call. However, the recent ouster of OpenAI CEO Sam Altman, who was reportedly fundraising in the Middle East for an early-stage AI chip project, has raised the possibility of a new challenger to Nvidia’s dominance in the market for manufacturing the chips and processors needed to power large language models.
Despite these potential challenges, Nvidia’s continued success in the AI space has solidified its position as a leader in the industry, with the company focused on navigating trade restrictions as it looks to sustain its growth in the coming quarters.