The hype surrounding artificial intelligence (AI) continues to drive Nvidia’s sales and valuation to record highs.
- On Wednesday, Nvidia released its second quarter reports and showed that it has blown through all expectations of success.
- Second-quarter revenues ending on July 31 reportedly hit $13.5 billion, surpassing expectations of $11.2 billion, and double this time last year at $6.7 billion.
- The company also notes that it is expecting $16 billion in revenue in the third quarter, with analysts predicting that sales will be boosted by 170%.
- Increased earnings per share of $2.70 rallied its stock soaring by 9.5% in after-hours trading.
Why It’s News
The demand for chips has created an unprecedented situation for Nvidia, which has stood above the market as one of the most sizable beneficiaries of the ongoing AI revolution. This has proven highly beneficial to the stock market, with Nvidia leading a 10% rally through July and a 36% year-to-date rally for the Nasdaq 100.
“We view last night as a historical moment for the broader tech sector and a sneak preview of what is on the horizon after hearing the guidance from…Jensen and Nvidia. Very simply, Nvidia’s guidance and commentary was at ‘drop the mic’ level, as investors now recognize crystal clear this A.I. demand story is as real as any tech trend we have seen in the last 30 years,” says Wedbush analyst Dan Ives.
The company has benefited from its sale of specialized processors that are well suited to the needs of large-language models and generative AI technologies and applications, which has meant that the company has struggled to keep up with superconductor demand as tech companies and startups rush to build their own AIs. This rapid pace has some analysts predicting that the company will maintain its remarkable rally for an extended period of time.
However, some critics argue that the fever pitch of hype that is generating Nvidia’s firestorm is dangerous for the market overall. DeVere Group CEO Nigel Green, who is generally bullish on AI, argues that “This level of hype is dangerous as it could lead investors to assume that these stocks are a silver bullet to build long-term wealth, and they are not, at least not on their own.”
As we previously reported, many analysts believe that AI investment has entered a bubble—and that investors should tread cautiously as they make their investment decisions.