Nvidia can’t escape shadow of AI spending fears

livemint.com:

Nvidia has made life at the top look easy. But staying there is going to be anything but. The chip maker, which has gone from a niche videogame component supplier to a $3 trillion enterprise in just a few years, put up another round of strong results Wednesday.

Its now-dominant data center segment increased revenue to $26.3 billion—more than 2½ times what that business generated a year earlier. Adjusted operating income for the quarter more than doubled year over year to $19.9 billion. Nvidia’s overall top and bottom lines beat Wall Street’s targets, as did the company’s forecast for the current period ending in October.

But the magnitude of those beats was smaller than what Nvidia has been delivering over the past year, as its business exploded on booming demand for artificial-intelligence capabilities from the world’s largest tech giants. Expectations from investors have blown up right along with it. Nvidia’s projected revenue of $32.5 billion for the current quarter ending in October was 2% ahead of Wall Street’s targets; the company’s projection for the same period last year beat analysts’ consensus by 28%, according to FactSet data.

Also, the new products that Nvidia is building to stay well ahead of the competition are rising significantly in complexity—weighing a bit on the company’s gross margin line. But even that is a bit of a nitpick; Nvidia’s gross margin of 75.1% for the most recent quarter was down 3 points from three months earlier, but well above the 65% the company has averaged over the past four years. And even at 75%, Nvidia is commanding a higher gross margin than all but one of the other companies on the PHLX Semiconductor Index, according to data from S&P Global Market Intelligence.