(Bloomberg) — Nvidia Corp., facing more investor skepticism, used its latest quarterly report to tout progress in diversifying the company, which aims to rely less on the giant data center operators that have fueled its runaway growth.<\/p>\n
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Though spending has continued to surge from large data center clients \u2014 a group known as hyperscalers \u2014 Nvidia predicted that a vast array of other businesses and governments would soon become a bigger source of revenue. They\u2019re poised to snap up Nvidia\u2019s chips and other computing products to support their own artificial intelligence ambitions.<\/p>\n
Down the road, so-called physical AI will bring a colossal new opportunity in the form of robots and automated vehicles, Chief Executive Officer Jensen Huang said on a conference call with analysts. \u201cWe\u2019ve got it all covered,\u201d he said.<\/p>\n
But investors have become harder to impress. Even after the company beat analysts\u2019 estimates with its results and forecast, the shares fell 1.8% to $219.51 in New York on Thursday. Shareholders weren\u2019t swayed by an expansion of investor rewards, including a massive increase to the company\u2019s dividend.<\/p>\n
Sales in the three months ending in July will be about $91 billion, the company said in its quarterly report. That topped the average estimate of $87 billion, though analysts\u2019 projections ranged as high as $96 billion, according to data compiled by Bloomberg.<\/p>\n
At the same time, the company is facing the first major challenges to its dominance in AI computing, with a variety of chipmakers trying to carve out a piece of the business. And major buyers of Nvidia\u2019s technology are developing their own in-house components.<\/p>\n
Nvidia shares had gained 20% this year heading into the report. That increase outpaced the S&P 500 but trailed most major chip peers.<\/p>\n
Nvidia is the top seller of AI accelerators, chips used to develop artificial intelligence models. But it faces growing competition from across Silicon Valley. Advanced Micro Devices Inc. has rival processors, and Broadcom Inc. and Alphabet Inc.\u2019s Google are attacking the market with their own technology.<\/p>\n
Nvidia remains in an enviable position, with Wall Street predicting that the company\u2019s revenue will account for more than a third of the entire semiconductor sector\u2019s sales this year.<\/p>\n
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\u201cThe build-out of AI factories \u2014 the largest infrastructure expansion in human history \u2014 is accelerating at extraordinary speed,\u201d Huang said in a statement.<\/p>\n
Data center spending, which is the main source of Nvidia\u2019s revenue, hasn\u2019t shown signs of letting up. Hyperscalers plan to shell out a combined total of roughly $725 billion on AI this year. And based on Nvidia\u2019s latest results, revenue from those companies continues to outpace other sources.<\/p>\n
That hasn\u2019t just buoyed sales of accelerators. General-purpose CPUs, or central processing units, also are in greater demand. That\u2019s lifted results for Intel Corp. and AMD. Chip upstarts are getting a boost as well: Cerebras Systems Inc., which offers a novel product based on large pieces of silicon, had the year\u2019s biggest initial public offering last week.<\/p>\n
Santa Clara, California-based Nvidia doesn\u2019t just sell accelerators. It offers a range of chips, as well as networking, software, AI models and even complete computer systems. That helps make its reach and capabilities unassailable, Nvidia management has argued. The company has said it has more orders than it can fill and is investing to add supply to meet that demand.<\/p>\n
In the three months ended April 26, Nvidia\u2019s sales gained 85% to $81.6 billion. Analysts had estimated $79.2 billion on average. Profit, minus certain items, climbed to $1.87 a share. That beat a projection of $1.77.<\/p>\n
Adjusted gross margin, the percentage of revenue remaining after deducting costs of production, was 75%.<\/p>\n
Nvidia boosted its quarterly dividend to 25 cents a share from a penny. And the chipmaker announced $80 billion in stock repurchases.<\/p>\n
Nvidia\u2019s all-important data center unit generated revenue of $75.2 billion, compared with an estimate of $73.5 billion. Networking, part of the data center division, delivered $14.8 billion in sales, versus an estimate of $12.7 billion.<\/p>\n
As part of its report, Nvidia said it was transitioning to a new framework that would better reflect \u201cits current and future growth drivers.\u201d Its data center sales figures will now separate hyperscalers from a group it calls ACIE, for AI clouds, industrial and enterprise customers.<\/p>\n
The company is on course to record total revenue of more than $370 billion this year, according to estimates. By that measure, it will be roughly 22 times the size it was in fiscal 2021. Nvidia easily chalks up more sales in a quarter than its next three largest rivals combined.<\/p>\n
Huang has just returned from a trip with President Donald Trump to China, the largest market for semiconductors overall. US export rules have stymied Nvidia\u2019s growth in that country by restricting sales of AI accelerators on national security grounds.<\/p>\n
The Trump administration has begun allowing older Nvidia products to be sold to Chinese customers. But Beijing, trying to cultivate local suppliers, has resisted that initiative. That\u2019s left Nvidia mostly locked out of a market that it has said could generate $50 billion a year.<\/p>\n
The company said Wednesday that it\u2019s still not getting any data center revenue from China.<\/p>\n
Meanwhile, Nvidia continues to branch out into new areas. It\u2019s beginning to sell general-purpose processors and is offering chips tailored to the inference stage of artificial intelligence. That\u2019s the point where models are already trained and beginning to handle real-world inputs.<\/p>\n
The company said it expects to get $20 billion in CPU revenue this year, which would make it the world\u2019s largest supplier.<\/p>\n
(Updates share trading in the fourth paragraph.)<\/p>\n
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