Nvidia to Wall Street: What are the supply problems?

Nvidia to Wall Street: What are the supply problems?

Nvidia (NVDA) reported impressive results for the second quarter on Wednesday, shattering Wall Street expectations on both the bottom line and the top end. But perhaps the most important news came during the company’s earnings call when Chief Financial Officer Colette Criss tried to allay investor concerns about the supply crunch and the impact of additional US sanctions against China.

Chris told analysts that Nvidia is in a good position on both fronts.

“Our supply partners have been exceptional in increasing capacity to support our needs,” said Chris. “We have also developed and qualified additional capabilities and suppliers for key steps in the manufacturing process.”

According to Chris, Nvidia expects to increase supplies every quarter through next year, which should help the company meet the huge increase in demand it is seeing as the AI ​​craze continues to gain steam.

TAIPEI, TAIWAN - 06/01/2023: Jensen Huang, President of NVIDIA holds a Grace hopper chip CPU used in generative AI at the supermicro keynote presentation during COMPUTEX 2023. COMPUTEX 2023 runs from May 30 to June 02, 2023 and gathers more More than 1000 exhibitors from 26 different countries with 3000 booths to display their latest products and sign orders with foreign buyers.  (Photo by Walid Barazig/SOPA Images/LightRocket via Getty Images)

Nvidia CEO Jensen Huang holds the Grace hopper system at COMPUTEX 2023. (Walid Berrazeg/SOPA Images/LightRocket via Getty Images)

In the most recent, second quarter, Nvidia’s revenue jumped about 101% year-over-year to $13.5 billion, while earnings per share rose 429% to $2.70. And demand is not slowing, as the company said it expects to generate $16 billion in revenue in the current quarter, plus or minus 2%. This is well above analysts’ expectations of $12.5 billion.

Kris also touched on whether additional US sanctions on selling high-end chips to China would affect Nvidia’s revenue going forward: the company shouldn’t have any problems, she said.

“We believe the current regulation is achieving the desired results given the strong demand for our products around the world,” said Chris. “We do not expect the additional export restrictions on our data center GPUs, if approved, to have an immediate material impact or financial consequences.”

Proof the big names still buy

In addition to quelling concerns that Nvidia could run into inventory shortages — or that it would be hit by rising tensions between the US and China — Chris pointed to a number of big-name companies that continue to buy Nvidia products.

“Data center revenue nearly tripled year-on-year, primarily driven by accelerated demand from cloud service providers and large consumer internet companies,” it said.

Major companies including AWS (AMZN), Google Cloud (GOOG), Meta (META), Microsoft Azure (MSFT), and Oracle Cloud (ORCL), as well as a growing number of GPU cloud service providers, are deploying, in volume. Large, HDX systems rely on core GPUs straining for the Hopper and Ampere architecture.

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As for how long Nvidia can sustain this kind of growth, CEO Jensen Huang pointed to the enormity of the global data center market — and the need for companies to focus more on accelerated computing and AI.

“There are data centers worth about $1 trillion, let’s call it a quarter of a trillion dollars in capital spent every year. You see data centers around the world taking that capital expenditure and focusing it on the two most important computing trends today: accelerated computing and artificial intelligence,” Huang said. obstetric.”

“It’s not even close. This is a long-term shift in the industry. We’re seeing both of these platform shifts happening at the same time,” he added.

However, Nvidia needs to make sure it can maintain its leadership in the chip space throughout this transition period. But with competitors AMD, Intel, and others seeking to dethrone the AI ​​giant, this could be a tall order.

Daniel Holly He is the Technology Editor at Yahoo Finance. He has been covering the tech industry since 2011. You can follow him on Twitter @Daniel Holly.

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