As big tech continues to spend more money than ever on building out AI infrastructure, chip maker Nvidia has continued to reap the rewards, once again delivering an earnings and revenue beat in the fourth quarter. Society is rapidly moving toward AI and investments in the field are ramping up, writes eToro analyst for Romania, Bogdan Maioreanu.
Last night, Nvidia’s earnings report reassured investors that demand for AI remains strong, as businesses continue to turn to the best in the game, despite concerns over cheaper AI alternatives coming to market. Nvidia is the bellwether for AI demand, and this result will once again alleviate the naysayers.
It is relevant what revenue sources the company had in the fiscal year. Data Center is leading with revenue of $35.6 billion (+16% QoQ, +93% YoY) and signaling an increasing demand for AI infrastructure, training, and inference. Importantly, Blackwell production ramped up significantly, delivering $11 billion of revenue in Q4, and is only set to increase further in Q1. This once again quashes worries over supply, which has been a grey cloud over the stock in recent quarters. The positivity around Blackwell saw a bullish revenue forecast for the next quarter, signaling $43 billion in revenue, above forecasts. However, Gaming Revenue was only $2.5 billion (-22% QoQ, -11% YoY), impacted by supply constraints.
While compared with the other two revenue streams the company’s Automotive sector sales are relatively small, but we are seeing a sizable increase with revenue exceeding $570 million (+27% QoQ, +103% YoY). This increase was driven by autonomous vehicle advancements. In the Earnings call, CEO Jason Hwang mentioned that Toyota, the largest automotive manufacturer in the world, will build its next-generation vehicles on Nvidia Orin running the safety-certified Nvidia Drive OS. Hyundai Motor Group announced it is adopting Nvidia technologies to accelerate AV and robotics development and smart factory initiatives. Aurora and Continental will deploy driverless trucks at scale powered by Nvidia Drive Thor. Nvidia’s end-to-end autonomous vehicle platform has passed industry safety assessments like TÜV SUD and TUV Rheinland. Nvidia is the first AV platform that received a comprehensive set of third-party assessments. So, we are expecting to see quick advances in the autonomous driving field.
If there was a spot of weakness to take away from the result, it was the margin guidance for the next quarter. Nvidia’s margins are being squeezed at a time when the business is bringing new, more complex products to market. However, this is because the AI opportunity is expanding with huge tailwinds across a host of sectors. Nvidia considers that enterprise AI and physical AI are the next major growth areas. The company considers that fundamentally, the software has changed from hand-coding that runs on CPUs to machine learning and AI-based software that runs on GPUs and accelerated computing systems. And this shift means that Nvidia will need to continue innovating.
Nvidia is the second most held stock by Romanian investors and the first one by global investors on the eToro platform. From the beginning of the year, the company’s stock price has dropped 2.24% but over the last 12 months, it has soared almost 66%. This year, in the “Magnificent 7” stocks only Meta stock is showing gains, rising 15%, while all others are showing decreases. Tesla, whose sales crumbled on the European market is the company in the group that had the largest fall from the beginning of the year of almost 28%, followed by Alphabet – Google parent – with 8%. All other companies’ decreases are between 2 and 5%. Investors in Nvidia are happy that estimated investments in AI are forecasted to grow, but the ones in the other Magnificent 7 wonder when we will see a sizable influence of these in the profitability of the companies. Meanwhile, the AI race continues and has the potential to change the world as we know it.
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