Nvidia released their earnings Wednesday after the closing bell and investors won’t stop talking about them. What gives? Nvidia, a tech company that was somewhat unknown until recently, has become a Wall Street darling. Why is everyone freaking out about Nvidia?
What is Nvidia?
Nvidia is a tech company headquartered in Santa Clara, California that was once best-known for its graphics processing unit, or GPU, production. Computer gamers who want top-of-the-line graphics often buy Nvidia graphics cards, allowing their machines to process complicated visual effects without issue.
Is That Why Their Stock Is Valued so Highly?
Bluntly, making GPUs doesn’t make your stock cost more than $100 per share. Nvidia hit the big time when it pivoted to selling data center chips to Google, Microsoft, and other big-name tech companies so they could make generative AI models work. That’s right, Nvidia is the AI enabling company.
How Did This Happen?
In 2023, Nvidia became only the seventh publicly traded company in the US to be valued at over $1 trillion. For a day in June 2024, they overtook Microsoft as the most valuable publicly traded company. Put frankly, that is absurd, and it speaks to how seriously the tech world is treating the AI boom.
Second Quarter Earnings
Now that you’re caught up, here’s why people are buzzing about Nvidia right now. Wednesday, shortly after announcing its second-quarter earnings, Nvidia stock slipped, somewhat paradoxically, by about 2%. Importantly, $26.3 billion of the company’s $30 billion revenue came from its data center business.
Beat Expectations (Slightly)
Nvidia’s earnings ever so slightly beat out industry expectations. Pundits were looking for Nvidia to have $28.8 billion in the second quarter. While $1.2 billion is nothing to ignore, it’s not quite the resounding win that Nvidia bulls were calling for. That could partly explain why the company’s shares slipped slightly on the news.
Expectations Target Rises
The chipmaker also announced it was raising its expectation for third quarter revenue in light of huge demand for its current data center chips. Nvidia is now expecting to bring in $32.5 billion, while analysts were calling for around $31.9 billion. Notably, Nvidia’s expectations leave around 2% wiggle room, so that’s not far from what the industry is anticipating.
Blackwell Chip
Nvidia CEO Jensen Huang says that the tech world is hungry for the company’s forthcoming Blackwell chip. This upcoming product will reportedly be critical for next-generation AI models and is expected to drive huge revenue for the company. The company says Blackwell could easily result in “several billion dollars” in sales.
Ramping Up Production
While Blackwell won’t go into production until the fourth quarter of this year, the company says its already ramping up production of its current-generation Hopper chips. This lays out the company’s upcoming plans in clear detail, as CFO Colette Kress says investors should expect Blackwell production to continue “into fiscal 2026.”
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Gaming Division
Somewhat ironically, the company’s gaming division reported revenue of $2.8 billion. That division used to be the company’s biggest earner, and yet now it’s more of an added bonus on its data center earnings. With its new focus on AI chips, Nvidia’s past as a gaming giant is little more than a footnote to investors now.
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Is AI Here to Stay?
Of course, this means that Nvidia’s stock value is now directly tied to the fate of AI. Will AI prove to be profitable for the tech companies that are investing billions of dollars into it? Is general AI a real possibility, or is it just a science fiction pipe dream? No matter what the future holds, one thing is clear: people who bought Nvidia stock in 2022 are pretty happy right now.
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