Nvidia forecasts higher revenue but warns of China uncertainty
SAN FRANCISCO: Nvidia on Wednesday (Aug 27) projected third-quarter revenue above market estimates, driven by robust demand for its artificial intelligence (AI) chips, but shares slipped as the company signalled China sales remain on hold.
The AI chipmaker expects revenue of US$54 billion, plus or minus 2 per cent, compared with Wall Street’s average forecast of US$53.14 billion, according to LSEG data.
Nvidia has not assumed any sales of its H20 chips to China in the guidance, after Washington said it would impose a 15 per cent commission on shipments but has yet to publish a rule codifying the fee.
Shares dipped 2.6 per cent in extended trade, wiping about US$110 billion off its US$4.4 trillion market value. The decline came despite second-quarter revenue of US$46.74 billion, which beat expectations of US$46.06 billion.
DATA CENTRE SALES IN FOCUS
Nvidia’s data centre business brought in US$41 billion, about half from large cloud providers. Analysts said the figure was slightly below forecasts, suggesting hyperscalers may be cautious about near-term AI spending.
“The data centre results, while massive, showed hints that spending could tighten if near-term returns remain difficult to quantify,” said Jacob Bourne, analyst at eMarketer.
Nvidia has been a major beneficiary of an arms race among big technology companies such as Microsoft and Meta to build AI systems. Its advanced chips can handle the large-scale data needed to power generative AI applications.
TRADE WAR PRESSURE
The company has been caught between Washington and Beijing in their battle for AI supremacy.
In May, Nvidia warned US export restrictions could shave US$8 billion off its quarterly sales. Since then, it has struck a deal with the US government to pay a 15 per cent levy on some China sales in return for easing curbs, though Beijing has advised domestic companies to avoid the chips.
“While the forecast excludes China, there is definitely upside should they be able to take sales there next quarter. That is a big question mark,” said Ben Bajarin, CEO of technology consultancy Creative Strategies.
Despite the uncertainty, analysts say Nvidia remains the bellwether for AI demand and a driving force behind the rally in US equities over the past two years.
