Shares of Nvidia Corp. rose more than 6% in extended trading to close at their highest ever value, as the company smashed Wall Street’s targets in its second-quarter financial results and offered strong guidance.

The chipmaker said its impressive growth is being driven, not surprisingly, by the rise in artificial intelligence and a shift toward “accelerated computing.”

The company reported earnings of $2.70 per share, easily beating Wall Street’s forecast of $2.09 per share. Revenue climbed by as much as 88%, to $13.51 billion, way ahead of the analysts’ consensus estimate of just $11.2 billion. Even more spectacular was Nvidia’s bottom line, with its net profit ballooning to $6.19 billion from just $656 million a year earlier.

The Nvidia train will not stop any time soon either, as the chipmaker forecast third-quarter revenue of around $15.68 billion to $16.32 billion, miles ahead of Wall Street’s $12.59 billion estimate.

Nvidia’s rampant sales growth underscores the critical role it plays in the generative AI boom. OpenAI LP and ChatGPT ignited huge interest in a new generation of AI models that can create text, draw images and talk like humans and serve as assistants in multiple work scenarios.

However, none of those models would work if not for Nvidia’s A100 and H100 graphics processing units, which sit at the heart of those applications. GPUs are the most popular type of chip for training and running AI applications, and Nvidia has essentially cornered the market for the technology.

As a result of the rising demand for GPUs, cloud computing infrastructure platforms are rapidly transitioning to support the industry shift. The big cloud operators – Amazon Web Services Inc., Microsoft Azure and Google Cloud – have reportedly been buying up Nvidia’s GPUs by the bagful. At the same time, many of the world’s leading enterprise software giants are working directly with Nvidia to bring AI to multiple industries.

In a conference call with analysts, Nvidia Chief Executive Jensen Huang (pictured) said the data center industry is experiencing two simultaneous platform shifts at once, to accelerated computing and generative AI. “This incredible application now gives everyone two reasons to transition to do a platform shift from general-purpose computing — the classical way of doing computing — to this new way of doing computing: accelerated computing,” he said.

It’s a shift that can be enormously profitable for Nvidia, as the world’s only major supplier of GPUs. “The world has something along the lines of about a trillion dollars worth of data centers installed, in the cloud, enterprise and otherwise,” Huang explained. “That trillion dollars of data centers is in the process of transitioning into accelerated computing and generative AI.”

Nvidia Chief Financial Officer Colette Kress told analysts that it’s not only Nvidia’s newest Ada Lovelace GPU architecture that’s driving sales of its chips. In addition, the company is also selling thousands of GPUs and DGX supercomputer platforms based on its older Ampere hardware.

“We are still selling both of these architectures in the market,” Kress said. “Now, when you think about that, what does that mean from both the systems as a unit? Of course, it’s growing quite substantially, and that is driving in terms of the revenue increases.”

Nvidia’s share price had tripled in value this year, even prior to today’s report. It is the best-performing stock in the entire S&P500, and at the time of writing its price had topped $503.40 a share. If it closes at that level on Thursday, it will set a new record compared with its prior closing high of $474.94 on July 18.

The financial results show how its business has been transformed. Whereas the gaming business segment was once its most profitable, it is now dwarfed by the growing data center unit. The chipmaker said the data center business grew its revenue by 171% from a year earlier, to $10.32 billion, well ahead of analysts’ consensus forecast of $8.03 billion.

“Two to three years ago, people were asking if Nvidia would be able to sell its chips to the major public cloud vendors,” said Holger Mueller of Constellation Research Inc. “Now, the question is how many chips can Nvidia sell to them, because demand outstrips supply. Production issues are the main concern for Nvidia now, because there is no competitor in sight for its GPU platform that powers generative AI workloads.”

Even better for Nvidia is that the now much smaller gaming business also continues to grow, with revenue there rising 22% from a year earlier, to $2.49 billion, also above Wall Street’s target of $2.38 billion. Nvidia’s early GPUs were originally designed to power graphics cards, and were only discovered afterwards to be suited to AI.

Nvidia also has a small business making GPUs for high-end graphics applications. Revenue there fell 24% from a year earlier, to just $379 million. Its fourth business segment, automotive, added $253 million in sales, up 15% from a year earlier.

During the call, Kress addressed analysts’ concerns over how Nvidia’s business might be affected by further export restrictions placed on China, which has been buying up millions of GPUs lately. She said the company doesn’t foresee any immediate risk to its business. “Given the strength of demand for our products worldwide, we do not anticipate that additional export restrictions on our data center GPUs, if adopted, would have an immediate material impact to our financial results,” she said.

Following today’s report, Nvidia stands as the U.S.’s fifth-largest company in terms of market capitalization, behind only Apple Inc., Microsoft Corp., Alphabet Inc. and Amazon.com Inc.

Photo: Nvidia