Nvidia CEO dismisses concern about end of spending boom on AI chips

Nvidia's CEO Jensen Huang has confidently addressed worries regarding a potential slowdown in spending on artificial intelligence (AI) chips. Speaking on Wednesday, he outlined a vision for the AI sector, predicting it will evolve into a multi-trillion-dollar market within the next five years, as reported by Reuters. Huang's optimistic forecast comes as a response to investors who have been unsettled by signs of decelerating growth at the chip manufacturing giant. Earlier in the day, Nvidia announced that its anticipated third-quarter revenue aligns with analyst expectations, though it did not meet the exceedingly high projections, leading to a share price increase of approximately one-third this year. In stark contrast to recent trends indicating fatigue among AI-focused stocks, Huang stated, "A new industrial revolution has started. The AI race is on. We see $3 trillion to $4 trillion in AI infrastructure spend by the end of the decade." Expert opinions, like those from Matt Orton of Raymond James Investment Management, reinforce Huang's sentiments, suggesting that major technology firms are driving significant capital expenditures that benefit Nvidia. Despite Nvidia's shares outperforming the broader market's roughly 10 percent gain, AI-related stocks have shown signs of fatigue. Earlier this August, OpenAI's CEO Sam Altman expressed concerns that investors might be overly enthusiastic about AI. Huang, however, emphasized that Nvidia's innovations enable clients to process larger datasets with reduced energy consumption. He noted, "The more you buy, the more you grow. The buzz is: everything sold out." In a noteworthy transaction, a customer outside of China acquired $650 million worth of Nvidia's H20 reduced-capability chips, aimed specifically at the Chinese market, during the latest quarter. Huang's optimistic forecast also draws from expectations of $600 billion in data center capital spending by 2025, with significant contributions from major clients like Microsoft and Amazon. While Huang projected that Nvidia could secure around $35 billion in revenue from a data center that costs up to $60 billion, his remarks came alongside a conservative third-quarter sales estimate of approximately $54 billion, slightly above the $53.14 billion average of analyst predictions compiled by LSEG. Both Huang and Nvidia maintain a positive outlook on AI chip profit growth, especially since the company's second-quarter net income has already surpassed that of tech giant Apple for the fiscal third quarter. The demand for Nvidia's high-end Blackwell chips remains robust, with projections suggesting they will largely be spoken for by 2026. As portfolio manager Thomas Martin stated, "When you have something that is new, and it's growing as fast as it is, with all of the huge capex announcements from the hyperscalers, it's evidence that we're in the early stages of the AI boom."