Investors hold their breath at every blink of Nvidia, the microprocessor maker that has become the world’s largest company thanks to the artificial intelligence (AI) investment craze. The company born in Santa Clara (California) in 1993 presented the results of the third quarter of the fiscal year on Wednesday amid growing fears of a bubble in the artificial intelligence sector due to excessive billion-dollar investments and conspicuous circular relationships between a handful of companies in the sector.
The company led by Taiwanese-American Jensen Huang recorded profits of 31,767 million dollars, the equivalent of around 27,500 million euros, in the third quarter of the fiscal year, which includes the period between August and October. This figure represents a 59% increase compared to the same period last year.
Nvidia shares rose 2.85% on the day to $186.50 per share. In post-closing operations it appreciated by 4.5% and analysts expect it to increase once again once all operations are formalized.
“The demand for computing continues to accelerate and multiply in both training and inference, growing exponentially in both cases. We have entered the virtuous cycle of AI. The AI ecosystem is expanding rapidly, with more underlying model builders, more AI startups, in more industries, and in more countries. AI is everywhere, doing everything, at once,” said CEO Jensen Huang, via statement.
Numerous signs confirm the good performance of Nvidia’s business. Huang assured a few weeks ago that demand for AI chips was “exceptionally strong”. The engineer specified that the technology group expects to reach a cumulative turnover of over 500 billion dollars by 2026, figures that represent considerable growth potential. Last month, CC Wei, CEO of TSMC, Envy’s main chipmaker, assured analysts that demand for artificial intelligence remains “very strong,” even better than expected three months ago.
The results exceed investor expectations. Analysts had expected Nvidia to post growth of more than 50% in both net profit and sales during the fiscal third quarter. They claim that the main customers of the Californian giant are other giants such as Microsoft, Alphabet, Amazon and Meta. This select group of big tech companies plans to increase their combined investments in artificial intelligence by 34% over the next 12 months, reaching $440 billion, according to data compiled by Bloomberg.
Nvidia reported revenue of $57 billion, which represents a 62% increase over its revenue a year ago.
The CEO of Nvidia maintains a close relationship with the President of the United States, Donald Trump, due to the importance of his chips, which have become the subject of diplomatic negotiations. He was in fact one of the guests at the dinner that the American president hosted on Tuesday to entertain the crown prince of Saudi Arabia, Mohammed Bin Salman. Also present at the luxurious celebration were Tesla founder Elon Musk; Apple CEO Tim Cook; AMD President Lisa Su; and footballer Cristano Ronaldo, among others.
Few companies represent the rise of artificial intelligence better than Nvidia and OpenAI. The company founded by Jenseng Huang is a pioneer in the production of the most advanced microprocessors, which offer great computing power and are therefore necessary for the development of artificial intelligence. All companies that want to be at the forefront of the industry need their chips, which have become technological fields.
The Californian company has a systemic rating. Its capitalization represents 8% of the value of the entire S&P. Its fluctuations in the stock market not only affect stock market investors, but also impact the savings of retirees or investments of millions of families.
“This is the typical ‘if Nvidia is good, the market is good’ ratio,” Scott Martin, chief investment officer at Kingsview Wealth Management, told Bloomberg.
Analysts hope Nvidia’s results will help allay concerns about an AI bubble. Some doubts fueled after the disappointing results of Palantir, the company that uses artificial intelligence for the analysis of data that it exploits through defense contracts. The Oracle situation also did not help clear up the uncertainty on Wall Street. The company led by octogenarian Larry Ellison has lost 30% of its value since October due to doubts about its ability to make profitable the huge investments of tens of billions it has announced it will put into artificial intelligence.
Nvidia had fallen 12.4% since reaching the milestone of becoming the first company in the world to surpass a valuation of five trillion dollars in late October.
The presentation of the results comes the same week that Nvidia announced a deal with Microsoft to invest up to $10 billion in AI development company Anthropic, founded by former OpenAI employees. At the same time, Anthropic will acquire $30 billion in computing capacity from Microsoft Azure. Additionally, Nvidia and Anthropic will collaborate on chip design and engineering. Further evidence of the complex circular relationships in the industry is Nvidia’s $6.6 billion investment in OpenAI announced last October. It also does business with Tesla’s technology subsidiary, xAI. The Californian group will contribute another 100 billion dollars to OpenAI, the company at the forefront of generative artificial intelligence models. This company, founded by Sam Altman, reached a similar agreement with AMD, Nvidia’s rival, highlighting the murky dealings held by a dozen companies in the sector.
On the same day that Nvidia presented its results, the Brookfield investment fund announced a plan to raise more than $100 billion for investments in artificial intelligence. The fund manager launches the program in collaboration with the Kuwait Investment Authority (KIA), the emirate’s sovereign wealth fund, and with the participation of the microprocessor manufacturer.
