Text/Yang Jianyong

NVIDIA released its latest quarterly financial report, with revenue and profit both doubling. It can be said that under the wave of generative AI, all sectors have a strong demand for NVIDIA's high-performance AI chips, which in turn drives the company's revenue to soar, and even surges to $3 trillion in the capital market, showing investors' optimistic attitude towards the commercial prospects of AI and being regarded as the strongest company on earth by Wall Street.

Unfortunately, despite the strong revenue, the company suffered a severe setback in the capital market after releasing its financial report, with its market value evaporating by $196.2 billion (about 1.4 trillion yuan) overnight.

While NVIDIA has been climbing steadily in the capital market, there is also controversy over whether there is a bubble. In my opinion, there are also huge risks behind the surge, and we must be alert to the hidden dangers after the surge. But overall, under the wave of generative AI, NVIDIA is undoubtedly one of the biggest winners of this wave, providing strong computing power support for large models, including Google, Meta, Amazon and other technology giants rely on NVIDIA's AI platform.

Capital expenditures by technology giants have increased significantly, with only the top four cloud service providers in the world increasing their capital expenditures, which are expected to rise from $140 billion in 2023 to over $200 billion in 2024. Among them, NVIDIA AI chips are the core of artificial intelligence infrastructure such as data centers, and technology giants purchase a large number of NVIDIA AI chips, driving NVIDIA to become the world's largest chip manufacturer.

Revenue for the second quarter of fiscal year 2025 (ending July 28, 2024) was $30 billion, a record high and a 122% increase from the same period last year; quarterly revenue from data centers reached $26.3 billion, up 154% from the same period last year. Net profit was $16.6 billion, up 168% year-on-year.

Although NVIDIA's financial report is good, it is still not good enough. Compared with the 628% increase in net profit in the previous fiscal quarter, the growth has obviously slowed down, and investors are bound to take profits for the high share price.

At the same time, the next-generation Blackwell architecture chip has been delayed, and the chip of this architecture is expected to start shipping in the second fiscal quarter. Earlier, it was reported that the Blackwell series AI chips had to be postponed due to design defects. As a result, strong revenue still could not prevent a severe setback on the day of the financial report release, with the market value falling by nearly $200 billion.

Finally, the wave of generative AI sweeping the world is an important driving force for the development of science and technology, and NVIDIA is the core of this major technology, which cannot be separated from NVIDIA's high-performance chips. In other words, who has strong AI strength actually depends on how many NVIDIA GPUs they have.

As NVIDIA has always been at the forefront of AI transformation, its platform has played a vital role in AI applications in many fields. As a result, NVIDIA chips are in short supply and hard to come by, which in turn drives revenue to grow at a double-digit pace.

It is worth noting that generative AI further promotes the development of artificial intelligence, reshapes various industries, and creates huge commercial value, with significant performance in terms of customer experience, efficiency improvement, rapid decision-making, and innovation. As the potential demand in the artificial intelligence market is gradually released, it is expected to continue to release growth space for chip manufacturers.

Yang Jianyong, Forbes China contributor, expresses his personal views only. He is committed to in-depth interpretation of cutting-edge technologies such as the Internet of Things, cloud services, artificial intelligence, and smart homes.