“AI bubble? We see something very different,” Nvidia CEO says
Accelerating sales and massive chip bookings counter investor fears after weeks of declining shares.
Nvidia CEO Jensen Huang on Wednesday dismissed concerns about an AI bubble after the company stunned Wall Street with accelerating growth following several quarters of slowing sales.
The chipmaker’s stellar third-quarter earnings and upbeat fourth-quarter forecast eased, at least for now, investor worries that the AI boom has outpaced underlying fundamentals. Global markets have looked to Nvidia as a barometer for whether the massive investment in AI data centers has created a speculative bubble.
“There’s been a lot of talk about an AI bubble. From our vantage point, we see something very different,” Huang told analysts, highlighting the strength of demand from cloud providers. “We’re in every cloud. The reason why developers love us is because we’re literally everywhere… from cloud to on-premise to robotic systems, edge devices, PCs, you name it. One architecture. Things just work. It’s incredible.”
Huang repeated his forecast from last month that Nvidia has secured $500 billion in bookings for its advanced chips through 2026.
Shares of the AI bellwether jumped 5% in extended trading, positioning the company to add $220 billion in market value. Before the results, mounting doubts had pushed Nvidia’s shares down nearly 8% in November, despite a 1,200% surge over the past three years. The broader market is down almost 3% this month.
Following the earnings release, S&P 500 futures rose 1%, signaling a strong open for U.S. markets on Thursday.
The world’s most valuable company projected fiscal fourth-quarter revenue of $65 billion, plus or minus 2%, beating analysts’ average estimate of $61.66 billion, according to LSEG data. It forecast an adjusted gross margin of 75%, plus or minus 50 basis points, and CFO Colette Kress said Nvidia plans to maintain margins in the mid-70% range in fiscal 2027.
Third-quarter sales rose 62%, the first acceleration in seven quarters. Data-center revenue, now the core of Nvidia’s business, reached $51.2 billion in the quarter ended October 26, topping analysts’ expectations of $48.62 billion.
Nvidia’s strong results lifted shares of rivals and partners including AMD, Alphabet, and Microsoft.
The company also sharply increased how much it spent renting back its own chips from cloud providers that were unable to lease them out, with such contracts totaling $26 billion, more than double the previous quarter.
Cloud giants such as Microsoft and Amazon continue to pour billions into AI infrastructure, though some investors argue these companies have benefited from extending the depreciable life of Nvidia chips, artificially bolstering earnings.
Nvidia’s business is becoming increasingly concentrated: four customers accounted for 61% of revenue in its fiscal third quarter, up from 56% in the prior period.
The company has also deepened its financial exposure to the AI ecosystem, investing billions in startups that are among its largest customers, raising fears of a circular economy in which vendors fund their own demand. In September, Nvidia said it would invest up to $100 billion in OpenAI and supply it with data-center chips.
With U.S. export restrictions limiting sales to China, Nvidia is turning to the Middle East for new growth. On Wednesday, the U.S. Commerce Department authorized the export of the equivalent of up to 35,000 Nvidia Blackwell chips to two companies in Saudi Arabia and the United Arab Emirates, a deal worth well above $1 billion, according to market estimates.
But several issues remain outside Nvidia’s control. Asked about the biggest constraint on Nvidia’s growth, Huang offered a lengthy reflection on the scale, novelty, and complexity of the AI industry. He did not identify a single limiting factor but emphasized that the ongoing transformation requires careful coordination across supply chains, infrastructure, and financing.
Reuters contributed to this report.
