6 months ago • 2 mins
What’s going on here?
AI super heavyweight Nvidia reported the most anticipated set of results of the year on Wednesday – and they were seriously envy-inducing.
What does this mean?
In the investing world, there seem to be two camps these days: those holding Nvidia shares and those wishing they were. Just a few months back, Nvidia left jaws on the floor, predicting a whopping $11 billion in second-quarter revenue – a cool 50% more than what the pundits had expected. And now the firm’s gone and delivered again: the tech giant not only reported a stellar $13.5 billion, but it also projected $16 billion in revenue for the current quarter. That’s a staggering 170% jump from last year, surpassing even the wildest dreams of Nvidia enthusiasts. The burning question now is whether there’s any ceiling to this success.
Why should I care?
For markets: Back-up engine.
There’s one riddle everyone’s trying to solve – and that’s whether AI, with Nvidia at the helm, is strong enough to fuel stocks’ ascent even if the broader economy runs out of steam. Consider this: corporate profit made up around 16% of the US economy last year, and that’s been above 17% in the past. So hypothetically, even if the consumer-driven US economy hits a bump, AI-enhanced company profit could still surge, taking a bigger slice of the overall economic pie.
The bigger picture: Here comes the cold water.
During the post-Covid tech boom, buyers struggled to get their hands on the semiconductors they needed – and that led them to over-order, which caused a chip glut when the tide eventually turned. And while AI chips are a different beast, Nvidia is also struggling to meet the current insatiable demand. So it’s plausible that some customers, desperate for Nvidia’s coveted chips, might be inflating their orders too. But here’s the catch: if – just if – this demand starts to wane, Nvidia could find itself nursing an all-too-familiar supply hangover.
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