Growing Nvidia sales not enough to silence fears of looming tech bubble

Latest reports on semiconductor giant Nvidia reveal that artificial intelligence chip sales remained strong in its latest quarter, but demand wasn’t quite intense enough to dispel concerns that the AI frenzy may be cooling.

The results, released on August 27, were closely watched as Nvidia has become a key indicator of the two-year AI boom that has driven stock markets to record highs, according to Digital Watch Observatory.

The Silicon Valley company also recently became the first publicly traded firm to hit a $4 trillion market valuation.

However, recent research reports and remarks from major tech executives have fuelled worries among investors that enthusiasm for AI might be overblown.

Nvidia’s May-July figures may reinforce those doubts. While its processors — essential for the AI data centers being built globally — continue to sell well, growth isn’t as rapid as before.

The company’s data center division, which includes its AI chips, posted $41.1 billion in revenue, a 56% year-over-year increase but as the article notes, slightly below the $41.3 billion forecast by analysts, according to FactSet Research cited in the article.

Still, Nvidia exceeded profit expectations, reporting $26.4 billion, or $1.08 per share, and total revenue of $46.7 billion, also up 56% from last year.

Looking ahead, Nvidia projected revenue of $54 billion for the August-October quarter, topping analyst estimates. “We are in the beginning of the buildout,” CEO Jensen Huang told analysts during this week's conference call, adding the company expects “another $3 trillion to $4 trillion will be spent on AI initiatives by the end of this decade.”

Despite the upbeat forecast, Nvidia shares dropped 3% in after-hours trading following the earnings release, signalling lingering investor unease. The pullback was likely inevitable, given the stock has surged more than tenfold in the past two and a half years.

By Nazrin Sadigova