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Updated February 22nd, 2024 at 14:53 IST

Nvidia stock rises 10% after chipmaker’s quarterly revenue triples expectations

While Nvidia forecasts robust revenue growth for the first quarter, some analysts question the sustainability of this rapid expansion over the long term.

Reported by: Business Desk
Nvidia CEO Jensen Huang
Nvidia CEO Jensen Huang | Image:Nvidia
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Nvidia’s stock rises: Nvidia, on Wednesday, announced a strong surge in quarterly revenue, nearly tripling expectations, driven by soaring demand for its leading artificial intelligence (AI) chips. This performance sparked a 10 per cent after-hours rally in the company's shares.

The continued strong demand for Nvidia's data centre chips and GPUs reflects the widespread expansion of AI capabilities across various industries. Nvidia's dominance in the global market for AI chips, with major clients like Microsoft, underscores its pivotal role in powering AI-driven solutions.

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Analysts note that Nvidia's latest earnings reaffirm the substantial momentum behind the AI boom, which transcends mere market speculation and represents a significant investment by corporations worldwide.

The post-earnings stock surge propelled Nvidia's market capitalisation by over $129 billion, lifting the shares of other AI-related companies as well. In total, AI-related hardware suppliers saw a combined increase of $160 billion in stock market value.

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While Nvidia forecasts robust revenue growth for the first quarter, some analysts question the sustainability of this rapid expansion over the long term.

Nvidia's data centre segment, its largest revenue contributor, witnessed staggering growth of 409 per cent in the fiscal fourth quarter, surpassing estimates. However, supply chain constraints have hindered Nvidia's ability to meet the surging demand for its chips, although improvements are underway.

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CEO Jensen Huang acknowledged the supply challenges during a post-earnings conference call, underlining meeting demand in the short term remains a significant hurdle as production ramps up.

Analysts anticipate improvements in supply capacity, particularly from major supplier Taiwan Semiconductor Manufacturing Co (TSMC), which could alleviate some of Nvidia's supply constraints in the coming months.

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Despite facing tightened trade restrictions with China, Nvidia's revenue growth has remained resilient. The company disclosed receiving requests from antitrust regulators in various jurisdictions regarding its GPU sales and supply allocation efforts, indicating ongoing regulatory scrutiny.

In response to inquiries about permissible sales of AI chips to China, Nvidia expressed commitment to complying with regulations established by the U.S. Commerce Department, underlined its adherence to established rules and guidelines.

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(With Reuters inputs)

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Published February 22nd, 2024 at 09:48 IST

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