Nvidia outperformed expectations yet again last evening, disclosing a nearly $44.1bn turnover in the first quarter – marking an impressive 69% increase from the previous year.
However, even with the favourable figures and a hike in data centre sales, Nvidia sees potential challenges, as hinted by the flashing warning signals on its control panel, as reported by .
After the announcement, shares climbed close to five per cent post-market, supported by reported net earnings of $18.8bn, climbing 26%, and adjusted gross profit margins reaching 71.3 per cent before any China-associated expenses.
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Nevertheless, forecasts for upcoming revenues stand at $45bn, trailing slightly behind the expected market consensus, attributed to the latest repercussions stemming from Washington's intensified sanctions on tech trades to China.
According to information released to investors, Nvidia faced a $45bn markdown on unsold chips destined for Chinese distribution, thus forfeiting a prospective $2.5bn in revenue.
Additionally, projected consequences of U.S. export restrictions could potentially carve approximately $8bn from future gross earnings.
CEO Jensen Huang remained optimistic: "Global demand for Nvidia's AI infrastructure is incredibly strong", he proclaimed, highlighting the scaling up of their 'backwell' system—a heralded 'thinking machine' designed for AI logic currently distributing in large volumes.
Data centre domination
The cornerstone of Nvidia's AI strategy, the data centre department, demonstrated a substantial $39.1bn in income for the initial quarter, registering a 73% y-o-y boost, now composing 88% of the company's overall revenue.
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The firm's Blackwell and Hopper GPUs, which power everything from ChatGPT to Microsoft's Azure cloud, are included in this division.
Microsoft, a key partner, has deployed "tens of thousands" of Blackwell chips, with plans to ramp up to "hundreds of thousands," according to chief financial officer Colette Kress during the earnings call.
Nvidia's networking arm, a crucial component of its AI infrastructure, also raked in $5bn.
Gaming, once the chip giant's mainstay, continues to grow, rising 42 per cent year on year to $3.8bn.
This was boosted by demand for chips in the new Nintendo Switch 2.
Meanwhile, the company's automotive and robotics business soared 72 per cent to $567m.
"We don't know how he does it, but he does it," said Swissquote's Ipek Ozkardeskaya. "Even with a $2.5bn China hit and $4.5bn in inventory charges, Nvidia still came in a billion dollars above Wall Street."
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However, despite the impressive results, there are questions about whether the company's resilience will endure.
Forrester analyst Alvin Nguyen cautioned that prolonged trade uncertainty and escalating AI infrastructure costs could dampen enterprise demand over time.
"Simplifying supply chains will help, but the cost picture could slow investment if it drags on," he stated.
Analysts at TD Cowen increased their price target on the stock to $175, describing the results as "well above expectations" despite headwinds from China.
They observed a robust demand for Nvidia's systems among hyperscalers and mentioned that apprehensions about AI infrastructure scale are rapidly evolving.
However, they also pointed out that the impending transition to Nvidia's 'GB300' series might become the next "wall of worry" for investors, alongside growing concerns about potential AI market saturation.
The AI boom rolls on
Thus far, the rush towards AI appears unstoppable.
Nvidia's annual revenue soared to an impressive $130.5bn, with operating income reaching $81.5bn – an extraordinary 62.4 per cent margin.
Yet, geopolitical tensions and a maturing AI market could decelerate the tech giant's momentum.
"Nvidia continues to defy gravity", remarked Ozkardeskaya. "But gravity, eventually, always wins."