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Nvidia provides strong revenue outlook on demand for computer chips

See below article detailing Nvidia’s earnings beat and optimistic supply outlook:
 
Top of Mind Thoughts
  • Supply chain crunch over and company expects supply to improve quarter over quarter going forward
  • As supply constraints ease, inflation should come down in the second half of 2022
  • Digital applications for chips accelerating

Nvidia provides strong revenue outlook on demand for computer chips

Kif Leswing
KEY POINTS
  • Nvidia reported fiscal fourth-quarter earnings on Wednesday.
  • Data center sales rose 71%.
  • Nvidia has been boosted as cloud providers and enterprises turn to the kind of graphics processors it makes for artificial intelligence applications.
Nvidia co-founder and CEO Jensen Huang attends an event during the annual Computex computer exhibition in Taipei, Taiwan May 30, 2017.
Nvidia co-founder and CEO Jensen Huang attends an event during the annual Computex computer exhibition in Taipei.
Tyrone Siu | Reuters

Nvidia reported fourth-quarter earnings and sales on Wednesday that beat analyst expectations and provided a strong outlook for the current quarter. The stock fell about 2% in extended trading.

Here’s how the chipmaker did versus Refinitiv consensus expectations for the quarter ending January:

  • EPS: $1.32, adjusted, versus $1.22 expected, up 69% year-over-year.
  • Revenue: $7.64 billion, versus $7.42 billion expected, up 53% year-over-year.
Nvidia said it expects to report $8.10 billion in the first quarter, higher than analyst expectations of $7.29 billion. Nvidia CEO Jensen Huang said in a statement that the company is seeing “exceptional” demand because its chips are useful for artificial intelligence and other intensive applications.

Huang also said that Nvidia’s supply constraints were easing and that the company’s supply of products would increase “substantially” in the second half of 2022.

Nvidia was on a big run in 2021, but it is down about 10% year-to-date as investors are looking for safer investments in an inflationary environment.

Nvidia has been boosted as cloud providers and enterprises turn to the kind of graphics processors Nvidia makes for artificial intelligence applications such as speech recognition and recommendations. Nvidia reported $3.26 billion in sales from its data center business, up 71% annually.

During the quarter, Nvidia announced that Facebook parent Meta would use its chips for artificial intelligence research, for example.

Gaming is still Nvidia’s largest market, as its latest GeForce graphics processors are ideal for playing advanced computer games. The gaming business rose 37% year-over-year to $3.42 billion driven by GeForce sales, the company said.

Nvidia’s chips are also useful for professionals who need them for applications like computer-assisted design, rendering, and artificial intelligence. It reports those sales in its Professional Visualization business, which rose 109% annually to $643 million. The company said the growth was driven by workstation chip sales and hybrid working.

Nvidia said that nearly all of its GPUs now ship with software that prevents them from being used to mine cryptocurrency and that miners can buy specialized mining processors instead. It said it sold $550 million in crypto-specific cards in its fiscal 2022, and only $24 million in the fourth quarter.

In a sign of how Nvidia is navigating supply chain issues, it said it had $9 billion in long-term supply obligations, up from $2.54 billion a year ago.

“We expect supply to improve each and every quarter going forward,” Huang said on a call with analysts.

Nvidia was in talks to purchase Arm, a chip technology company, from SoftBank, but the company announced earlier this month that the transaction had fallen apart under regulatory scrutiny.

“We gave it our best shot. But the headwinds were too strong,” Huang said.

Nvidia said it expected a $1.36 billion charge to operating expenses as a result of the Arm deal failing to close.

February 16, 2022