Nvidia’s recent announcement projects a strong financial outlook for the first quarter, hinting at a sustained demand for its AI chips. The company’s new Blackwell semiconductors, in particular, have received extraordinary orders, reinforcing Nvidia’s leadership in the AI chip market. This optimism comes amid fears of reduced spending on hardware, sparked last month by China’s DeepSeek, which claimed advancements in AI models that could rival Western versions at lower costs.
However, Nvidia’s gross margin predictions for the current quarter have slightly missed Wall Street’s forecasts. The ramp-up of Blackwell chips has put pressure on profits, with the company anticipating a gross margin of 71%, just under the 72.2% expected by analysts, as reported by LSEG. Despite this, Nvidia’s shares climbed 1% in extended trading, closing with a 3.7% gain during regular trading hours.
Over the past two years, Nvidia has benefited greatly from a surge in AI-related stocks, with its shares increasing by over 400%. CEO Jensen Huang highlighted the enormous demand for Blackwell, stating that massive-scale production had quickly generated billions in sales, adding significant support to Nvidia’s data center revenue, which saw a substantial portion from Blackwell products.
In the fourth quarter alone, Nvidia amassed $11 billion in revenue from Blackwell-related products, accounting for roughly half of its data center income. CFO Colette Kress revealed that the company anticipates a revenue figure of $43 billion, plus or minus 2%, for the first quarter, surpassing the $41.78 billion average estimate by analysts.
The company’s progress is particularly noteworthy in the face of DeepSeek’s emerging low-cost AI models, which are reportedly driving increased orders for Nvidia’s H20 AI chips within China. The demand for these advanced chips is underpinned by the need for fast data processing in generative AI applications. Generative AI, a technology capable of learning and enhancing from data, necessitates such advanced hardware to maintain competitiveness.
Third Bridge analyst Lucas Keh noted the ongoing momentum with hyperscalers, large cloud-computing services, pointing out continued support for Nvidia despite innovations from companies like DeepSeek. Increasingly, businesses are racing to solidify their positions in the AI sector, with Nvidia remaining a front-runner.
In the recent earnings report, Nvidia’s adjusted earnings per share stood at 89 cents, beating Wall Street expectations of 84 cents. Fourth-quarter revenue rose to $39.3 billion, exceeding the predicted $38.04 billion. The data-center segment alone experienced a 93% growth to $35.6 billion, outpacing estimates of $33.59 billion, although this was a decline from the previous quarter’s 112% growth.
Nvidia’s latest results demonstrate resilience and adaptability in a competitive AI market. While facing potential challenges from new entrants like DeepSeek, Nvidia’s robust demand for its chips, particularly the Blackwell series, underscores its vital role in the technology ecosystem. This ongoing demand, coupled with strategic foresight, positions Nvidia as a continued leader in the evolving landscape of AI technology.
