By Tae Kim

Rumors of Nvidia's demise were greatly exaggerated. The AI chip king posted impressive results Wednesday night, and its overall growth prospects look as promising as ever.

The stock's 8.5% decline after earnings makes the opportunity all the more compelling for investors.

Nvidia's latest quarterly report surpassed Wall Street expectations. For the January-ended quarter, revenue increased 78% to $39.3 billion, exceeding the $38.1 billion estimate. The company's data center segment, fueled by AI chip sales, saw revenue nearly double to $35.6 billion. Nvidia provided solid guidance, projecting revenue for the current quarter to reach a midpoint of $43.0 billion, above the consensus of $42.1 billion.

These growth numbers are impressive, even for the world of technology.

Consider that Apple, the other technology giant in the $3 trillion market cap club, grew its revenue by just 4% in the latest quarter. The iPhone maker carries a forward price-to-earnings ratio of 32. Nvidia trades at 27 times earnings, despite growing 20 times faster than Apple. The math doesn't compute.

Blackwell, Nvidia's latest generation GPU and the star of the quarter, generated $11 billion in revenue, surpassing Nvidia's expectations. Nvidia management said Blackwell had the "fastest ramp in our company's history, unprecedented in its speed and scale."

"Demand for Blackwell is amazing as reasoning AI adds another scaling law -- increasing compute for training makes models smarter and increasing compute for long thinking makes the answer smarter," Nvidia CEO Jensen Huang said Wednesday.

He added: "Our technology is not only more advanced, more performant, it has much better software capability. And very importantly, our ability to deploy is lightning fast."

The numbers should alleviate concern from some who believed that demand for Nvidia's chips would soften following the release of newly efficient AI models from Chinese start-up DeepSeek.

Huang refuted that narrative, saying that AI reasoning features, like those from DeepSeek, OpenAI, Anthropic, and xAI, are driving a substantial increase in demand for artificial-intelligence computing resources.

Reasoning allows the AI model to reflect more thoroughly on a query by performing numerous thought computations before arriving at a higher-quality, longer response. It consumes 100 times more compute resources versus prior AI models, Huang said.

In a post-earnings interview with Barron's, Nvidia Chief Financial Officer Colette Kress also highlighted Blackwell's superior inference performance, which is the process of generating results from AI models. "Inferencing with Blackwell is exceptional. It's a 30X improvement right out of the gate" versus the prior products, she said, noting that demand for Blackwell exceeds Nvidia's current production capacity.

The most significant revelation from Nvidia on Wednesday was about the company's upcoming chips. Huang confirmed that Blackwell Ultra, the successor to Blackwell, is on track for release later this year. He said that the move to Blackwell Ultra should be seamless compared with the current "challenging transition" to Blackwell from Hopper, which required a complicated upgrade to 72 GPUs from eight GPUs inside each server rack. The move to Ultra should be smoother as it has a similar server architecture.

Huang also said that more information about Blackwell Ultra and its next GPU, called Rubin, would be unveiled at Nvidia's GTC Developer conference in March. He said Rubin would be a "big, huge step up."

On Friday morning, Nvidia shares opened higher but then fell sharply after President Donald Trump announced that tariffs on Canada and Mexico, along with an additional tariff on China, would take effect on March 4.

Therein lies the biggest risk for Nvidia this year. Trump has threatened chip tariffs that could impact Nvidia's Asia-made products. On the earnings call, Kress acknowledged that the government's tariff policy remains unknown in terms of timing and magnitude.

What we do know is that investors aren't eager to see those duties. A significant decline in stocks could push the Trump administration to backpedal on any overly onerous policies, making it somewhat self-correcting.

Given the unknowns on government policy, investors would be better served focusing on Nvidia's fundamental outlook. The company has strong quarters ahead given the successful launch of Blackwell, and the growing demand for AI driven by innovations such as agents, reasoning capabilities, and multimodal models that can process images, videos, and audio.

Investors shouldn't miss out on the run.

Write to Tae Kim at tae.kim@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 27, 2025 16:30 ET (21:30 GMT)

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