Nvidia smashes forecasts and eases AI bubble fears with record results
With trillions in market value and the weight of the AI revolution on its shoulders, Nvidia proved it remains the bellwether for tech’s biggest bet.
The weight of financial markets was resting on chip darling Nvidia to not only hit its quarterly numbers, but prove the sky is the limit. Chief executive Jensen Huang delivered.
The Nvidia boss was brimming with confidence over demand for his chips that are at the very heart of the AI revolution. In fact, sales were “off the charts”.
Ring the bell: The AI boom is back on.
That the world’s financial system was sweating on whether the $US4.5 trillion Nvidia could beat its quarterly numbers should be a big worry in itself. And these results really weren’t about whether Huang plans to ship more of the latest version of his powerful Blackwell chips this quarter versus the last. The fears are centred on Nvidia’s customers being able to keep the AI bubble afloat.
Specifically, whether the ones buying the high-powered chips can keep up with the trillions that need to be spent building out data centre capacity. These doubts have been pulling down everything from Wall Street to bitcoin.
Huang tackled that head on. “There has been a lot of talk about an AI bubble. From our vantage point, we see something very different.”
“We see the opportunity to grow for quite some time,” Huang said.
Still, in the arms-race level of spending among the likes of OpenAI, Anthropic, Microsoft, Meta and Alphabet in building out AI capacity mixed with growing doubts over the massive revenue growth needed to cover the investments, this means markets are likely to face the exact same anxiety approaching Nvidia’s next set of accounts in three months time.
Any sign of wavering or paring back of demand will be brutal for tech stocks mostly made up of Wall Street’s Magnificent Seven, but will also hurt broader sentiment given AI spending is widely seen as underpinning US economic growth.
The laws of diminishing returns mean at some point Nvidia will find it harder to overdeliver.
That day has not arrived – yet.
Following the after-hours release of the Nvidia accounts, early futures trading in the Nasdaq tech index jumped 1.5 per cent (a large move for futures). Nvidia shares were up as much as 6 per cent in after-hours trade.
Aussie exposure
Nvidia matters. It ranks as the single biggest equity exposure for AustralianSuper ($US2.1bn) and UniSuper ($US1.4bn). Nearly every other super fund has exposure either directly or through index funds. Given Nvidia’s command over supplying the incredibly powerful chips, it has become the canary in the coal mine for the AI age.
Complicating this is the increasingly interconnected nature of Nvida’s business model. It has started to become a big investor in its own customers, including a massive deal in September that promising to plough $US100bn into OpenAI over time. Just this week it pledged $US10bn into Anthropic as part of a co-investment with Microsoft (another customer).
There is still capacity for its shares to move even higher. While Nvidia has soared, so too has its earnings engine. Currently its shares are trading at a 30 times forecast earnings – high for an mature industrial but relatively modest for an AI bet and it is at the low end of its historical range.
Nvidia’s revenue for the third quarter was $US57bn, up 62 per cent on the same time last year and coming in ahead of already lofty market estimates of $US55bn. It’s generating profit margins above 70 per cent. Huang forecast revenue for the fourth quarter at $US65bn, running $US3bn ahead of what the market had pencilled in.
Huang sought to address questions over the health of his customers – which range from the biggest tech players in the world and massive data centre hyperscalers, to smaller fast growing players also building out capacity.
How customers finance the demand for chips “is up to them,” Huang says, but noted acquisitions mostly were being funded from their own cashflows. And many were seeing a dramatic shift in their business models, including a jump in revenue from deploying AI applications.
The biggest concern at the moment is not demand, rather it’s keeping Nvidia’s supply chain running at full speed. While he didn’t directly address it, Huang’s comments around escalating demand (Nvidia chief finance executive Colette Kress told investors they “sold out” of chips) suggest any pullback by any single player could easily be absorbed by the market.
But Huang also likened the massive data centre build-out underway to pushing new boundaries on Moore’s Law – the long-held rule in computing that although chip power doubles every few years, this has a finite life.
“One of the areas that is really misunderstood about the hyperscalers is that the investment on Nvidia (graphics processing units)..improves their scale, speed, and cost from general-purpose computing”.
“Moore’s Law is about driving cost down … but that has slowed. Therefore, a new approach is necessary for (customers) to keep driving the cost down. Going to Nvidia GPU computing is really the best way to do so.”
The canary is still singing, for now.
Staying on
The best governance in the world is only as strong as those enforcing the rules. This will be the ultimate test for Mineral Resources’ new board, which has the job of reining in the excesses and related-party deals of chief executive and founder Chris Ellison.
A year on from Ellison’s mea culpa and his promise to stand down by mid-2026, the goalposts have shifted. Ellison’s long goodbye will be even longer. In fact, it’s indefinite, with succession planning downgraded to a business-as-usual process. This means Ellison will continue to wield the power at his $10bn iron ore miner until he decides it’s time to go.
To be sure, the rebound in lithium prices and surprising stability of iron ore, even with China’s tariff fight, has taken the pressure off Ellison. And with Ellison’s base of loyal shareholders, his own 11.5 per cent stake and influence across every part of the miner, few expected him to really go as promised.
Rather that provided a circuit breaker last year as scandal around him blurred the lines between private and public business. MinRes shareholders cast their opinion on the matter on Thursday, with only 13 per cent issuing a protest vote against the company. This meant MinRes (and Ellison) missed out on copping a second strike.
While there were promises of a governance overhaul from last year’s compliant board, what is surprising is the speed of the shake-up under new chair Mal Bundey, the former Pact boss and Brickworks deputy chair. In the past six months, there’s been five exits from the MinRes board and new independents brought in (including Bundey from April).
There’s now specific board oversight of governance and compliance, and there’s been two external reviews covering systems and culture, with recommendations being implemented. Efforts to exit Ellison’s related-party deals are underway and long overdue oversight of tendering in place. Importantly, there’s now a formal financial framework around new ventures, including liquidity buffers and leverage targets. From the outside, MinRes is growing up. However inside it’s still a one-man band with Ellison calling the shots. Now it’s up to Bundey to walk the talk to show he can keep Ellison in check. The way Bundey sees it, strong governance is an accelerator – not a barrier – to entrepreneurialism and high performance. Ellison needs to change the way he works too. Let’s hope so.
Like we’ve seen at WiseTech, efforts by the previous board to start putting in place guard rails around a powerful founder turned to dust the moment Richard White felt too boxed in. Now the tech company is in a worse place, with an ASIC probe underway around White and several executives and big investors bailing out. MinRes could face the same fate if it doesn’t follow through with its governance promises.
johnstone@theaustralian.com.au
To join the conversation, please log in. Don't have an account? Register
Join the conversation, you are commenting as Logout