By Arsheeya Bajwa and Stephen Nellis
(Reuters) -Nvidia forecast fourth-quarter revenue above Wall Street estimates on Wednesday, betting on booming demand for its AI chips from cloud providers against the backdrop of widespread concerns of an artificial-intelligence bubble.
The results from the AI chip leader mark a defining moment for Wall Street, as global markets look to the chip designer to determine whether investing billions of dollars in AI infrastructure expansion has resulted in a valuation bubble that potentially outpaces fundamentals.
The world’s most valuable company said it expected fiscal fourth-quarter sales of $65 billion, plus or minus 2%, compared with analysts’ average estimate of $61.66 billion, according to data compiled by LSEG.
Shares of the AI market bellwether were up more than 4% in extended trading. Ahead of the results, doubts had pushed Nvidia’s shares down nearly 8% in November, after a surge of 1,200% in the past three years. The broader market has declined almost 3% this month.
“Blackwell sales are off the charts, and cloud GPUs are sold out,” CEO Jensen Huang said in a statement. “The AI ecosystem is scaling fast — with more new foundation model makers, more AI startups, across more industries, and in more countries. AI is going everywhere, doing everything, all at once.”
Sales in the data-center segment, which accounts for a majority of Nvidia’s revenue, grew to $51.2 billion in the quarter ended October 26. Analysts expected sales of $48.62 billion, according to LSEG data.
But some analysts noted that factors beyond Nvidia’s control could impede its growth.
“While GPU demand continues to be massive, investors are increasingly focused on whether hyperscalers can actually put this capacity to use fast enough,” said Jacob Bourne, an analyst with eMarketer. “The question is whether physical bottlenecks in power, land, and grid access will cap how quickly this demand translates into revenue growth through 2026 and beyond.”
Nvidia’s business also became increasingly concentrated in its fiscal third quarter, with four customers accounting for 61% of sales. At the same time, it sharply ramped up how much money it spends renting back its own chips from its cloud customers who otherwise cannot rent them out, with those contracts totaling $26 billion – more than double their $12.6 billion in the previous quarter.
Still, analysts and investors widely expect the underlying demand for AI chips, which has powered Nvidia’s results since ChatGPT’s launch in late 2022, to remain strong.
Huang said last month the company has $500 billion in bookings for its advanced chips through 2026.
Big Tech, among Nvidia’s largest customers, has doubled down on spending to expand AI data centers and snatch the most advanced, pricey chips as it commits to multibillion-dollar, multi-gigawatt buildouts.
Microsoft reported a record capital expenditure of nearly $35 billion for its fiscal first quarter last month, with roughly half of it spent primarily on chips.
Nvidia said it expected adjusted gross margin of 75%, plus or minus 50 basis points, in the fourth quarter, compared with market expectations of 74.5%.
(Reporting by Arsheeya Bajwa in Bengaluru and Stephen Nellis in San Francisco; Editing by Arun Koyyur and Matthew Lewis)
