Nvidia takeaways: Bubble talk, 'half a trillion' forecast and China orders

Nvidia recently announced its fiscal third-quarter earnings, surpassing expectations and providing an optimistic forecast for the upcoming quarter. The news triggered a positive response on Wall Street, resulting in a surge in Nvidia's stock, as well as increases in other companies linked to the artificial intelligence sector. The semiconductor giant continues to lead in the AI chip market, particularly with its GPUs. CEO Jensen Huang expressed confidence in the company’s future during a call with analysts, projecting approximately $65 billion in sales for the current quarter, marking a remarkable 65% year-on-year growth. During the earnings call, Huang addressed concerns regarding an 'AI bubble' that some investors have been voicing. He emphasized that the current growth in AI is fueled by three distinct applications. These include the use of GPUs for non-AI software, the development of innovative AI applications, and 'agentic AI' that operates independently of user input, all of which are driving significant investments in infrastructure. Analysts at Bernstein noted that Huang's reassurance helped alleviate investor fears about a potential bubble following a recent downturn in AI stocks. They remarked, "Perhaps the AI trade is not yet dead after all," highlighting Huang's ability to calm investor nerves. Additionally, Huang reiterated that Nvidia has approximately $500 billion worth of orders for AI chips expected in 2025 and 2026, a forecast that remains on track. The company’s order backlog does not currently reflect several recent deals, including partnerships with Anthropic and Saudi Arabia. Nvidia’s CFO, Colette Kress, indicated that the backlog is likely to grow, stating, "We'll probably be taking more orders." Huang also expressed optimism about Nvidia's long-term growth potential in the AI market. Despite the positive financial outlook, Nvidia faced challenges in its China operations. The company struggled to secure licenses to export its H20 chip to the Chinese market, a situation complicated by geopolitical tensions and increased competition within China. Kress revealed that sales of H20 chips were minimal, amounting to only $50 million for the quarter, as substantial orders did not materialize due to these issues. Nvidia has argued that allowing the export of advanced chips would benefit national security by ensuring that Chinese developers are familiar with Nvidia technology rather than relying solely on domestic alternatives. Kress reaffirmed the company's commitment to engaging with both U.S. and Chinese governments to advocate for competitive practices. Analysts from Melius pointed out that the lack of sales from China made Nvidia’s financial performance even more remarkable, predicting that the company could generate nearly $400 billion in free cash flow over the next nine quarters. The outlook remains cautious, with no immediate expectations of resolving the situation in China.