Nvidia shares jumped in after-hours trading Wednesday, as the chipmaker beat expectations on revenue and said it was benefiting from a growing boom in A.I. technology driven by chatbots like OpenAI’s ChatGPT.
The U.S.-based chip company’s 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 company’s net income was $1.4 billion, a 53% year-on-year decline.
Yet Nvidia shares surged 8.9% in after-hours trading after Nvidia CEO Jensen Huang was bullish on the company’s prospects for A.I. technology, which Huang said was at an “inflection point.” On a call with analysts, Nvidia’s CEO said that activity around its A.I. services—driven by the viral success of chatbots like ChatGPT—had “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 Nvidia’s A.I. services to enterprise customers. Huang said enterprises now have “a sense of urgency…to 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 Hennessy, chairman of Google parent Alphabet, suggested to Reuters that an A.I.-powered search request using Google’s Bard A.I. currently costs 10 times as much as a standard keyword search.
Nvidia’s 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. Nvidia 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 processing units (GPUs), which help produce the computer graphics used in today’s video games. Nvidia’s 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 Nvidia’s 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 Nintendo’s 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 company’s earnings report, noting strong demand for the company’s 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 in their video game consoles.
On Tuesday, Nvidia announced that it would be bringing Microsoft-published games to the company’s 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.
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