Nvidia Passes $900 Billion Market Cap In Extended Trading After Forecast Surprise
There are surprises in the earnings reports, and then there’s what chipmaker Nvidia announced after the market closed on Wednesday.
The chipmaker forecast sales of $11 billion in the next quarter, more than 50% more than analysts had expected. The upbeat forecast sent shares of the chipmaker up almost 25% in extended trading.
The increase would push Nvidia’s market capitalization to more than $940 billion, up from $755 billion at market close. That’s twice as much as leading chipmaker Taiwan Semiconductor Manufacturing Company, and almost three times as much as Korean electronics company Samsung Electronics. Nvidia is now approaching the $1 trillion market capitalization threshold in the hands of just four other US companies: Apple, Microsoft, Alphabet and Amazon.
“We’re seeing incredible calls to reshape the world’s data centers,” CEO Jensen Huang said on a call with analysts, predicting that companies will upgrade $1 trillion worth of data centers to become AI-capable.
Nvidia reported $7.1 billion in revenue for the most recent quarter, a 13% year-over-year decline, but still above expectations. Data center revenue, which is from Nvidia chips used for machine learning and artificial intelligence, hit a record $4.28 billion.
Nvidia shares are now at a record high, surpassing their previous peak of November 2021, which occurred during the chip shortage. Stocks fell from those heights last year as a chip shortage turned into a chip glut. Retailers stocked up on excess inventory and post-pandemic consumers bought fewer electronics, hurting demand for chips.
That correction in the electronics market can still be seen in Nvidia’s earnings, as the company reported a 38% year-over-year drop in its gaming division.
However, while Huang was enthusiastic with analysts, yesterday he was much more dovish in another context.
In an interview with the financial times, The Nvidia CEO highlighted a major threat to Nvidia and the US chip industry in general: the Biden administration’s export controls on sales to China. Huang argued that the new US measures were forcing Nvidia and its peers to work with “their hands tied behind their backs.”
The United States is limiting the sale of chips and chipmaking equipment to China to preserve its advantage in key technologies, including AI. The government has asked Nvidia to stop selling some of its chips to China to ensure they are not diverted to military purposes, the company has revealed. in a stock presentation last year. Nvidia was forced to develop a less powerful chip for the Chinese market.
The lack of chips is a limitation for AI development in China. The country only has about 40,000 units of Nvidia’s A100 processor, used in machine learning and subject to US export restrictions, Megvii CEO Yin Qi estimated earlier this year in an interview with Caixin.
“China is a very important market for the technology industry,” Huang told the financial times. “There is no other China, there is only one China,” he said, warning of “enormous damage to American companies” if the chip trade were halted.
The Nvidia CEO even suggested that shutting down the China market would undermine the US effort to boost its own local chip manufacturing via the $52 billion in subsidies offered through the CHIPS and Science Act. the lawsuit would mean that “no one is going to need American factories, we will be swimming in factories,” he said. (“Fabs” is short for semiconductor manufacturing plant, or the factories that produce chips.)
Technological tensions between Washington and Beijing also open a door for non-US competitors. On Sunday, Chinese regulators barred a wide range of entities from buying chips from US-based Micron Technologies. While regulators have cited cybersecurity risks, analysts believe the ban is in retaliation for US chip controls.
The ban sparked a rally in Chinese chip shares as investors bet local companies will eventually be able to replace imported semiconductors. And South Korea, home to major chipmakers Samsung Electronics and SK Hynix, has hinted it would not stop its own companies from filling the void left by Micron.
If China can’t buy chips from the US, “they will just build them themselves,” Huang told the financial times.