Nvidia shares jumped in after-hours trading Wednesday, as the chipmaker beat expectations on revenue and said it was benefitting from a growing boom inA.I. technology driven by chatbots like OpenAIs ChatGPT.
The U.S.-based chip companys revenues fell, as it reported $6.1 billion in revenue in the most recent quarter, a 21% fall from what it reported a year ago. (That revenue, at $7.6 billion, was a record for the chipmaker.) The companys net income was $1.5 billion, a 52% year-on-year decline.
Yet Nvidia shares surged 8.9% in after-hours trading after Nvidia CEO Jensen Huang was bullish on the companys prospects for A.I. technology, which Huang said was at an inflection point. On a call with analysts, Nvidias CEO said that activity around its A.I. servicesdriven by the viral success of chatbots like ChatGPThad just gone through the roof in the past several months.
The chip company announced that it would partner with cloud providers to offer access to Nvidias A.I. services to enterprise customers. Huang said enterprises now have a sense of urgencyto develop and deploy A.I. strategies, yet suggested that companies faced an insurmountable obstacle in getting access to infrastructure, algorithms and techniques for A.I.
A.I. requires a lot of computing power, which can get expensive for even large enterprises, let alone startups. John Hennessey, the chairman of Google parent Alphabet, suggested to Reuters that an A.I.-powered search request using Googles Bard A.I. currently costs 10 times more than a standard keyword search.
Nvidias dominance in the A.I. chip market has put the company in the U.S.s regulatory crosshairs as Washington tries to limit the sale of advanced semiconductors to Chinese companies. The company later designed a constrained version of its A.I. chip for the Chinese market to comply with U.S. restrictions.
Gaming slump
The boom in A.I. technology could help to offset a slumping part of the business: video games. Nvidia makes graphics processors (GPUs), which help produce the computer graphics used in todays video games. Nvidias gaming revenue fell by 46% year-on-year in the most recent quarter to reach $1.83 billion. (In contrast, data center revenue, which includes much of Nvidias A.I. business, rose by 11% over the same period.)
Gaming sales boomed during the pandemic as stuck-at-home consumers turned to digital entertainment. But inflation and people returning to work have led to slumping sales of PCs, smartphones and video game devices, such as Nintendos Switch, the only video game device to use an Nvidia chip.
Gaming is recovering from the post-pandemic downturn, Huang said on Wednesday as part of the companys earnings report, noting strong demand for the companys newest GPUs.
Competing chip company AMD reported a smaller decline in gaming revenue in its most recent quarter, with $1.6 billion in gaming sales, down 6% year-on-year. Both Microsoft and Sony use AMD chips for their video game consoles.
On Tuesday, Nvidia announced that it would be bringing Microsoft-published games to the companys GeForce Now service, which allows users to stream graphically-intensive games hosted on an Nvidia server. Microsoft is agreeing to offer its games on more platforms to mollify regulators concerned about its pending acquisition of Activision Blizzard.
Learn how to navigate and strengthen trust in your business with The Trust Factor, a weekly newsletter examining what leaders need to succeed. Sign up here.
