U.S. semiconductor company Nvidia posted a surprise earnings beat in the first quarter, exceeding market expectations thanks to the ChatGPT craze. With rising expectations for second-quarter revenue growth, Nvidia's stock price is soaring nearly 27% in after-hours trading.
On the 24th (local time), Nvidia announced in its earnings report that its revenue for February to April (the company's fiscal 2024 first quarter) reached $7.19 billion. Although this represents a 13% decline compared to the same period last year, it significantly surpassed market expectations of $6.52 billion. Earnings per share were $1.09, down 20% year-over-year but still above the market estimate of 92 cents.
This strong performance is attributed to the surge in sales of Nvidia's AI semiconductors driven by the emergence of generative artificial intelligence (AI) like ChatGPT, as well as a booming data center (virtual server) business. Revenue from the data center segment, including AI semiconductor sales, surged to $4.28 billion during this period.
Nvidia projected second-quarter revenue of $11 billion, which is more than 50% above the market consensus of $7.15 billion.
Jensen Huang, Nvidia's CEO, said in the earnings announcement, "We are producing next-generation semiconductors to meet AI demand," adding, "We will significantly increase supply to satisfy the rapidly growing AI demand."
Generative AI like ChatGPT mostly uses Nvidia's graphics processing unit (GPU) systems. Nvidia's market share in semiconductors used for AI development currently exceeds 90%.
The Wall Street Journal (WSJ) analyzed, "Demand for generative AI like ChatGPT is opening a huge revenue stream for Nvidia," and added, "Nvidia semiconductors are essential for developing generative AI like ChatGPT, and building a single AI system may require thousands of Nvidia products."
Nvidia is also conducting generative AI research alongside Amazon, Microsoft, and Google. Recently, it launched DGX Cloud, a subscription-based computing infrastructure for generative AI development, and AI Foundation, a corporate generative AI model development service based on this infrastructure.
Through these services, companies can develop and operate AI using Nvidia's cloud without the need to procure hardware themselves.
After closing down 0.49% in regular trading, Nvidia's stock price surged 26.89% in after-hours trading as of 5:19 p.m. local time, fueled by the surprise earnings and strong second-quarter revenue outlook. Nvidia's stock has more than doubled this year on expectations of benefits from generative AI.
Meanwhile, Nvidia's gaming GPU sales fell 38% compared to a year ago. Gaming business revenue during this period was $2.2 billion, which is attributed to continued downturn effects due to inventory burdens amid the economic recession.
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