NVDA results disappoint Wall Street

However, Nvidia has forecast that it will generate revenue of $37.5 billion in the December quarter, give or take 2 percent. If it reached the central number, it would be slightly above consensus expectations.

Blackwell appears to be a resounding success, with Nvidia CEO Jensen Huang saying demand for the chips is “insane.”

In fact, demand for the chips appears to be significantly outpacing Nvidia and Taiwan Semiconductor Manufacturing Company (TSMC)’s ability to supply them, boding well for the first half of next year.

The company is riding the AI ​​boom with an estimated market share of more than 80 percent for the chips that power it.

There’s a race among the biggest tech companies to grab market share for AI-powered technologies they expect to be game-changers.

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Amazon, Google parent Alphabet, Facebook parent Meta Platforms and Microsoft have increased their capital spending by nearly 60 percent so far this year, largely due to their investments in AI. They’re on track to spend more than $240 billion this year – as a group, they’re spending more each quarter than they did in a year before the AI ​​arms race began.

While there are investors who are skeptical that AI investments will produce returns in the near future that justify the scale of the investments made, companies see a generational opportunity. Since the supply of chips is limited, this leads to very high margins for Nvidia.

While Nvidia has competitors – Microsoft, Intel, AMD, Amazon and Google are developing their own AI chips, and there are a host of smaller companies and startups trying to develop their own products for advanced AI models – Nvidia’s dominance is, first of all, the mover status and financial strength offer him the opportunity to consolidate his position.

Cash is flowing through its business – its balance sheet is $38.5 billion, or close to cash – even as new markets and applications for its increasingly sophisticated chips are emerging quickly.

The only constraints on the company are the high expectations of investors, where calculating outperformance becomes more difficult the larger Nvidia gets. its ability to produce the chips to meet demand and U.S. restrictions on selling advanced chips to China.

The Biden administration has not only blocked China from buying advanced chips and chipmaking equipment from U.S. suppliers, but has also pressured its allies to do the same.

Dutch company ASML, which makes the cutting-edge extreme ultraviolet lithography systems essential to producing the most sophisticated chips, is unable to sell its latest generation of machines to China.

Recently, the world’s largest chipmaker TSMC told its Chinese customers that it would no longer supply them with its most advanced AI chips after the Biden administration put pressure on it after its chips were found in a Huawei AI device. All future sales are likely to be subject to a US approval process.

China is the world’s largest buyer of semiconductors and has committed more than $140 billion to building its own chip industry. However, due to US sanctions, the country is struggling to produce even the 7-nanometer chips, which are several generations behind the leading US companies now.

The new Trump administration, constantly staffed by reputable China hawks, is unlikely to weaken its predecessor’s restrictions on chip exports to China or access to AI chip manufacturing technologies.

The only constraints on the company are the high expectations of investors, where calculating outperformance becomes more difficult the larger Nvidia gets.

Although the sanctions block access to a potentially huge market for Nvidia’s most powerful AI chips, for now this does not pose a major threat to the company’s continued growth as it cannot meet demand from other customers.

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In the longer term, its dominance and the lucrative nature of the AI ​​chip market will continue to incentivize its own key customers and competitors to pump capital into developing their own chips, while competition regulators may become more focused on the impact of its dominance.

The big tech companies will want to reduce their reliance on a single supplier (and the cost of developing their AI models), while competitors will want a share of the big profits and margins that can be made from the AI ​​chips that matched Nvidia’s revenues, as shown in the latest earnings, further highlighting.

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