NVIDIA, opens new tab forecast higher first-quarter revenue on Wednesday, signaling continued strong demand for artificial intelligence chips, and said orders for its new Blackwell semiconductors were "amazing."
The company's forecast helps allay doubts around a slowdown in spending on its hardware that emerged last month, following Chinese AI startup DeepSeek's claims that it had developed AI models rivaling Western counterparts at a fraction of their cost.
Reuters reported today that Nvidia's outlook for gross margin in the current quarter was slightly lower than expected, though, as the company's Blackwell chip ramp up weighs on Nvidia's profit. Nvidia forecast first-quarter gross margins will sink to 71%, below the 72.2% forecast by Wall Street, according to data compiled by LSEG.
Its shares advanced 1% in extended trading, after closing up 3.7% in regular trading. Nvidia is the biggest beneficiary of a rally in AI-linked stocks, with its shares up more than 400% over the last two years.
“Demand for Blackwell is amazing," CEO Jensen Huang said in a statement. "We’ve successfully ramped up the massive-scale production of Blackwell AI supercomputers, achieving billions of dollars in sales in its first quarter."
The Santa Clara, California-based company generated $11 billion of revenue from the Blackwell-related products in the fourth quarter, which was roughly 50% of the company's overall data center revenue, Nvidia's Chief Financial Officer Colette Kress said in her commentary.
Kress said as Nvidia ramps up production of its Blackwell chips, the company will lower its costs and improve its margins, saying it will return to the mid-70% range later in the fiscal year.
The company expects revenue of $43 billion, plus or minus 2% for the first quarter, compared with analysts' average estimate of $41.78 billion, according to LSEG.
"Despite the breakthroughs from DeepSeek, Nvidia's momentum with Hyperscalers seems to continue," Reuters cited Third Bridge analyst Lucas Keh saying, referring to large cloud-computing companies.
Chinese companies are ramping up orders for Nvidia's H20 AI chip due to booming demand for DeepSeek's low-cost AI model, Reuters reported on Monday.
Demand has grown for Nvidia's advanced chips that can speedily process the large amounts of data used by generative AI applications, as companies race each other to emerge as leaders of the new technology. Generative AI is a type of artificial intelligence that can learn from data and improve over time.
John Belton, a portfolio manager at Nvidia investor Gabelli Funds, said the forecast "should be a positive read for AI demand and investment cycle."
Big Tech companies - among the largest buyers of Nvidia chips - have remained steadfast on their forecast for large capital expenditures to expand AI infrastructure, despite investor concerns over payouts. Microsoft (MSFT.O), opens new tab has earmarked $80 billion for AI in its current fiscal year, while Meta Platforms (META.O), opens new tab has pledged as much as $65 billion.
A recent brokerage report suggested that Microsoft has scrapped leases for sizable U.S. data center capacity, suggesting potential oversupply. But Reuters reported on Monday that Chinese companies are ramping up orders for Nvidia's H20 AI chip due to booming demand for DeepSeek's low-cost AI model.
The Stargate data center project announced last month by U.S. President Donald Trump will use Nvidia’s Spectrum X ethernet for networking, Kress said. The ethernet products are included in the company's data center segment.
Nvidia reported adjusted per-share profit of 89 cents, compared with estimates of 84 cents a share. Revenue for the fourth quarter grew 78% to $39.3 billion, beating estimates of $38.04 billion.
Sales in the data-center segment, which accounts for most of Nvidia's revenue, grew 93% to $35.6 billion in the quarter ended January 26, above estimates of $33.59 billion. The segment had recorded growth of 112% in the prior quarter. - February 27, 2025
