Nvidia Beat Earnings, but Investors Are Asking the Wrong Question. Here’s

They say the sequel is never as good as the original, but Nvidia (NVDA 0.34%) seems to be proving that wrong. Three years after the launch of OpenAI’s ChatGPT, which kicked off the artificial intelligence (AI) boom, Nvidia is still posting blockbuster results and blowing past Wall Street estimates quarter in, quarter out.

The AI chip superstar reported revenue of $57 billion in the quarter, up 62% from the quarter a year ago. That actually represented an acceleration from the second quarter, when sales growth had slowed to 56%, and was well ahead of the consensus at $55.1 billion. Notably, that acceleration came without the return of significant revenue from China.

Once again, growth in data center revenue, the focal point of the AI boom, was even stronger, up 66% to $51.2 billion.

The news helped to quell fears about an AI bubble at a time when tech stocks have been pulling back, especially those that are most exposed to AI, including highly leveraged neocloud operators like CoreWeave and Nebius.

Nvidia, which was down 12% from its recent high before the report, jumped 6% on the news, adding $300 billion in market value to approach a $5 trillion market cap again.

Image source: Nvidia.

Bubble, what bubble?

Nvidia CEO Jensen Huang didn’t shy away from addressing talk of an AI bubble. In fact, he began his remarks on the earnings call by addressing those concerns, saying: “There’s been a lot of talk about an AI bubble. From our vantage point, we see something very different.”

Huang went on to explain the massive investment in non-AI software, and said he sees that shifting away from central processing units (CPUs) to Nvidia graphics processing units (GPUs), arguing that “Accelerated computing has reached a tipping point,” and that AI has as well.

Nvidia’s guidance indicates that its blistering growth will continue into the fourth quarter as the company is calling for revenue of around $65 billion, well ahead of expectations at $62 billion and representing 65% growth from the quarter a year ago, meaning Nvidia’s revenue growth would accelerate again in the fourth quarter to 65%.

Today’s Change

(-0.34%) $-0.60

Current Price

$178.28

Key Data Points

Market Cap

$4347B

Day’s Range

$176.50 – $180.87

52wk Range

$86.62 – $212.19

Volume

1.4M

Avg Vol

192M

Gross Margin

70.05%

Dividend Yield

0.02%

Investors need to zoom out

Making Nvidia the avatar of the AI revolution makes sense. After all, Nvidia stock has skyrocketed since the launch of ChatGPT. It’s now the most valuable company in the world, at nearly $5 billion, because of AI, and because it continues to dominate the market for data center GPUs and AI compute.

However, investors following Nvidia for clues into whether or not there’s an AI bubble need to look elsewhere as well. Nvidia’s contribution to the AI revolution is essential, but the company is building the rails for the AI boom, and that only counts if people want to ride the trains. In tech, that means…