Nvidia Delivers Blowout Q3 FY24 on Continued AI Demand

Nvidia Q3 FY2024 Results

The chip giant announced on Tuesday after Wall Street closed, its results for the three-months ended October 29 (Q3 FY24), delivering another blockbuster report. Continuing AI demand was the force behind the new record bottom and top lines. Net income in excess of $9 billion, marked a mindboggling 1,259% increase compared to a year ago, while revenues more than tripled, to $18.12 billion. Furthermore, executives expect sales expansion to accelerate in Q4 FY2024, as the $20 billion forecast would constitute a roughly 230% y/y jump.^[1]

Its Data Center business was the main revenue generator, with a 279% y/y surge, driven by global demand for "the training and inferencing of large language models, recommendation engines, and generative AI applications", according to CFO Colette Kress. CEO Jensen Huang attributed the blowout results to the "transition from general-purpose to accelerated computing and generative AI", proclaiming that "the era of generative AI is taking off".

NVIDIA has enabled the generative artificial intelligence revolution, sparked by OpenAI's ChatGPT conversational chatbot, which was released roughly a year ago. The leading work on accelerating computing has made its GPUs the go-to solution for handling the heavy workloads of training and deployment of such applications and large language models. ChatGPT, Microsoft's 365 Copilot and Zoom AI Companion are among the popular AI services that use Nvidia's infrastructure.

Illustrated by the strong forward guidance, NVIDIA anticipates further growth ahead. During Tuesday's earnings call, Ms Kress noted that the firm has ramped up output every quarter of the year and expects to continue into the next, in order to meet the "strong demand". Mr Huang on his part, said that Gen AI is "the largest" total addressable market expansion of software and hardware in "several decades". Sales of its latest GH200 Grace Hopper Superchip started during the reported quarter, which Ms Kress said is "ramping into a new multi-billion dollar product line".

However, its near-monopoly on AI infrastructure can't last forever. Although still far behind, rival Advanced Micro Devices (AMD) has stepped up its efforts. Shipments of MI300X AI GPU are to begin this quarter and start having some impact on its revenues, while Microsoft recently unveiled its in-house AI chips.^[2]

Furthermore, NVIDIA faces headwinds from the trade curbs on advanced technology that Washington has imposed against China and other countries. The strengthening of those restrictions in October means that previously unaffected GPUs like the A100, A800 and the H100, are now subject to licensing requirements. The CFO noted that the affected products and regions have consistently accounted for 20-25% of the Data Center revenues over the past few quarters and anticipates sales to decline significantly this quarter, albeit being offset by strong growth in other regions. However, the firm plans to expand its portfolio over the coming months, with products that don't fall under those restrictions.

Overall, NVIDIA's latest report showed exponential growth, while guiding for continuing AI demand ahead. Its unique position is also reflected in the stock price, which has more than tripled from the start of the year and clinched new all-time highs this week. Investor reaction was muted though, as the stock is facing some pressure during today's pre-market. The sky-high valuation seems to be creating some apprehension, while the China sales warning creates some concern.