Nvidia Quarterly Earnings Increased by Sixty Two Percent Exceeding Expectations

What Happened?

Tech giant Nvidia’s reported a sixty-two percent increase in earnings for the most recent quarter, earning fifty-two billion dollars and far exceeding expectations. The majority of the increase came from sales of Nvidia’s chips for use in AI data centers, as sales from the chip division rose by sixty-six percent to fifty-one billion dollars for the most recent quarter.

‘There's been a lot of talk about an AI bubble. From our vantage point, we see something very different,’ said Nvidia’s chief executive officer Jensen Huang. Sales for the next quarter are projected to grow again, reaching an estimated total of sixty-five billion dollars.

Why it Matters

Nvidia is currently the most valuable company in the world, with a market capitalization in excess of five trillion dollars. Concerns in financial centers such as Wall Street and London had been growing that tech companies were fueling an AI investment bubble, but the recent earnings report from Nvidia seemed to calm those fears, at least for the moment. 

There have been comparisons to the growing investments and optimism over AI to the dot com bubble of the late 1990s and early 2000s. When the dot com bubble burst, excessive investments and excitement over the future of the internet caused a lot of tech companies then previously on the rise to crater or even go out of business in a remarkably short period of time. It’s important to remember, despite the dot com bust, the internet still transformed daily social and economic life and continued to evolve in the subsequent decades.

Whether or not AI is a bubble remains to be seen, but even if it isn’t, it is probable that not all innovations or applications based on AI will be successful. It is likely some, maybe even many, of those projects could fail. In the short term that would represent losses for investors, but the larger question is what will be the trajectory of those AI endeavors that succeed? When the dotcom bubble burst it didn’t wipe out the internet it just wiped out some of the early efforts to capitalize on internet commerce.

If there is an AI bubble, and it eventually pops, that doesn’t mean it will wipe out AI, just that it could eliminate some AI efforts and not others. Which raises the important question of which AI applications have the best chance of being successful in the long run? The most likely answer is to look at those projects that are already enjoying success, such as ChatGPT from OpenAI. For Nvidia, there will come a point when the market is saturated with their chips, and after that point is reached, chip sales and overall revenue will likely drop off. 

How it Affects You

Nvidia’s strong earnings and the continued investments in AI infrastructure that fueled them indicate that companies are still looking for ways to create new AI capabilities and apply them to their operations. Which in turn means the foundations for an AI economy continue to be put in place.