Chip manufacturer Nvidia demonstrated significant revenue growth, sitting at the center of the artificial intelligence boom. According to the earnings report published on Wednesday, the company generated $96.2 billion in the last quarter, representing a 106 percent increase compared to the previous year. Furthermore, revenue from data center sales, which constitutes the vast majority of the business, reached $89 billion, an increase of 117 percent year-over-year.
Despite these impressive financial figures, the company's stock did not begin to rise until its post-earnings conference call on Wednesday evening. CFO Colette Kress informed investors that Nvidia's expected revenue for the 2028 fiscal year will grow by 70 percent, exceeding analysts' forecast of 45 percent.
After an initial dip following the report's release, Nvidia's stock (NVDA) rose by more than 4 percent after the market close. The company anticipates substantial growth, confident in the development of the AI ecosystem and its key role within it. It is viewed as an indicator of the AI market's health, as most industry technologies run on its chips.
CEO Jensen Huang stated during the conference call that 'everyone wants to participate in the AI revolution. Everyone must take part in this computational shift, and everyone must build infrastructure.' Additionally, the chip maker is increasing investments in other technology companies to finance their AI infrastructure, which has drawn criticism regarding its circular financing strategy. This cyclical nature of many financing deals has raised concerns that demand for AI might be artificially inflated.
On Wednesday, Nvidia and Amazon announced a new agreement that will expand the use of Nvidia semiconductor chips in Amazon's data centers. Amazon Web Services plans to utilize an additional 2 million Nvidia GPUs in its infrastructure. This expands upon a previous announcement from March, which stated that AWS was set to use 1 million Nvidia GPUs.
Overall, Nvidia's stock has risen by approximately 12 percent this year, comparable to the performance of the S&P 500 and Nasdaq Composite. After years of massive growth, Nvidia's stock shows a more moderate increase this year. While Nvidia has shown better-than-expected results in recent quarters, its shares have fallen after the reports were released.
There is a view that Nvidia's strong revenues imply that other leading tech firms will see sufficient future returns from AI to continue investing in its products, and investors may anticipate further market growth. However, building AI infrastructure is extremely expensive. So-called hyperscalers, such as Meta, Microsoft, and Google, who build data centers, have begun facing serious questions from investors about whether their billion-dollar investments will pay off or if they should cut costs.
Some market observers are concerned that excessive optimism regarding AI has driven tech stock valuations too high, potentially creating a bubble ready to burst. Earlier this month, Nvidia announced a partnership with a group of Wall Street firms to allow its customers to take out loans to purchase its products for AI infrastructure. Some analysts question whether this circular financing strategy could become risky for Nvidia if these customers do not realize tangible returns from the infrastructure they create.