Nvidia speeds past a pothole, and AI offers extra fuel for the road ahead

In an interview with MarketWatch on Wednesday, Kress said the company was working with its original equipment-maker partners to help clear out inventories as quickly as possible. “And we have a great new architecture,” she said.

Analysts were expecting first-quarter revenue to fall about 24% from last year, to $6.3 billion, but Kress gave an outlook for revenue to come in at $6.5 billion, plus or minus 2%. That puts Nvidia on track to live up to Wall Street’s expectations and return to revenue growth in the fiscal second quarter, which would end this downturn quicker than the “crypto hangover” of 2019, when revenue declined four consecutive quarters.

That news sent shares nearly 9% higher in after-hours trading Wednesday, even though Nvidia failed to meet expectations in its most important category, data-center sales. As some cloud-service providers paused in their build-out plans in recent months, Nvidia’s server sales grew only 11% and missed estimates, but Kress noted in her outlook that data center and gaming are expected to return to “strong growth” this quarter.

And while investors wait for that, Nvidia executives had a sweet carrot to dangle in front of them: artificial-intelligence revenue. Chief Executive Jensen Huang told analysts on a conference call that activity around Nvidia’s AI infrastructure “has gone through the roof” since the public debut of Open AI’s ChatGPT, a generative AI chatbot still in testing.

As MarketWatch has detailed, there has been a lot of hype — especially in earnings calls — about AI lately, without much detail about how exactly it will lead to more revenue from the tech companies that are selling that vision. Nvidia, though, does have concrete evidence of sales of AI-related equipment, and Huang detailed a new service that will offer Nvidia’s AI software and hardware through the cloud services of Oracle Corp.
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Alphabet Inc.
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and Microsoft Corp .
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“We are the underpinning for a big part of” the push toward more AI in future products, Kress told MarketWatch on Wednesday.

Nvidia will have to thread a needle here, as much of that AI revenue is still a few quarters out, gaming sales are still emerging from the inventory issues, cloud-service providers aren’t yet back to buying in bulk, and autonomous driving still hasn’t added much fuel to the AI engine. But if all of those pistons do start firing at once, Nvidia’s engine is going to be pretty unstoppable.