As chatbots explode, Nvidia’s sales outlook beats Wall Street expectations

Feb 22 (Reuters) – Chip designer Nvidia Corp (NVDA.O) on Wednesday forecast first-quarter revenue above Wall Street estimates as its CEO said using its chips to power intelligence services artificial intelligence (AI) like chatbots had “blown through the roof in the past 60 days.”

The sell-off outlook sent Nvidia shares up 8% in extended trading. The world’s largest supplier of chips used in data centers for training Artificial intelligence has become a key hardware supplier for big tech companies such as Microsoft Corp (MSFT.O) that create services such as cat-powered search.

AI is one of the few areas where tech companies are still spending, even as the sector cuts jobs. Microsoft and Alphabet Inc , for example, are both laying off thousands of employees, but are also engaged in a race to imbue their search engines with chatbot technology – despite the fact that this is likely to add billions of dollars to their operating costs.

Analysts believe that Nvidia, more than any other company, is best positioned to benefit from this cost increase, as it dominates around 80% of the market for graphics processing units, or GPUs, used to accelerate AI work. .

During a conference call with investors, Nvidia CEO Jensen Huang announced a new service in which Nvidia will offer its cloud computing service directly to companies to rent all of its technologies to develop their own AI services. “generatives” capable of creating text, images and other forms of data.

AI is still “not widely deployed in enterprises, but we believe that by hosting everything in the cloud, from infrastructure to operating system software to pre-trained models, we can accelerate the adoption of generative AI in enterprises,” Huang said.

The company forecasts revenue of $6.50 billion for the current quarter, plus or minus 2%. Analysts on average expect $6.33 billion in revenue, according to Refinitiv data.

Revenue for the quarter ended Jan. 29 was $6.05 billion, versus an average analyst estimate of $6.01 billion.

“The launch of generative AI models and the ongoing arms race should accelerate the adoption of the company’s new H100 products,” said Edward Jones analyst Logan Purk.

Nvidia’s outlook also helped lift the stock price of competitors such as Advanced Micro Devices (AMD.O), whose shares rose 3% after Nvidia’s results.

The Santa Clara, Calif. company got its start in the PC graphics chip business by helping video games look more realistic. While its revenue beat Wall Street expectations, Nvidia’s sales were still down year-over-year as the company faced a slowing PC market.

But growth remained strong in the data center chip market. Analysts at Bank of America Global Research estimate that the rise of so-called generative AI, such as chatbots and imaging services, could add another $14 billion to Nvidia’s revenue by 2027.

Nvidia’s revenue from the data center business was $3.62 billion for the fourth quarter, slightly below analysts’ estimates of $3.84 billion. Gaming chip sales came in at $1.83 billion, beating analyst estimates of $1.52 billion, according to Refinitiv data.

Adjusted earnings were 88 cents per share for the fourth quarter, beating analysts’ estimates of 81 cents.

Reporting by Chavi Mehta in Bengaluru, Stephen Nellis in San Francisco and Jane Lee in Oakland, California; Editing by Shinjini Ganguli, Peter Henderson, Matthew Lewis and Himani Sarkar

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