Nvidia (NVDA-Q) announced on Wednesday a forecast for higher first-quarter revenue, signaling continued strong demand for its artificial intelligence chips. The company also reported that orders for its new Blackwell semiconductors were “amazing.” This outlook helps ease concerns about a slowdown in spending, following claims from Chinese AI startup DeepSeek that it developed AI models rivaling Western counterparts at a lower cost.
While Nvidia’s revenue forecast is positive, its outlook for gross margin in the current quarter is slightly lower than expected. This is due to the ramp-up of the Blackwell chip, which is impacting Nvidia’s profit margins. According to data compiled by LSEG, Nvidia projects that first-quarter gross margins will decrease to 71%, below the 72.2% forecast by Wall Street.
Nvidia shares increased by 1% in extended trading after a 3.7% rise during regular trading. The company has been a major beneficiary of the surge in AI-related stocks, with its shares increasing by over 400% in the past two years. “Demand for Blackwell is amazing,” said CEO Jensen Huang in a statement. “We’ve successfully ramped up the massive-scale production of Blackwell AI supercomputers, achieving billions of dollars in sales in its first quarter.”
The Santa Clara, California-based company reported $11 billion in revenue from Blackwell-related products in the fourth quarter, representing about 50% of the company’s total data center revenue. Chief Financial Officer Colette Kress stated that as Nvidia increases Blackwell chip production, the company expects to decrease costs and improve margins, aiming to return to the mid-70% range later in its fiscal year.
The company anticipates revenue of $43 billion, with a margin of plus or minus 2%, for the first quarter. This compares to analysts’ average estimate of $41.78 billion, as reported by LSEG. “Despite the breakthroughs from DeepSeek, Nvidia’s momentum with Hyperscalers seems to continue,” observed Third Bridge analyst Lucas Keh, referring to large cloud-computing companies. Reuters reported earlier this week that Chinese companies are increasing orders for Nvidia’s H20 AI chip due to the booming demand for DeepSeek’s lower-cost AI model.
Demand remains high for Nvidia’s advanced chips that can quickly process the vast amounts of data utilized by generative AI applications, as companies compete to become industry leaders. John Belton, a portfolio manager at Gabelli Funds, an investor in Nvidia, stated that the forecast “should be a positive read for AI demand and investment cycle.” Big Tech companies, major buyers of Nvidia’s chips, have remained steadfast on their large capital expenditure forecasts for expanding AI infrastructure, despite investor concerns.
Microsoft has allocated $80 billion for AI in its current fiscal year, while Meta Platforms has committed up to $65 billion. A recent brokerage report suggested that Microsoft had scrapped leases for a substantial amount of U.S. data center capacity, indicating a possible oversupply. However, Reuters also reported that Chinese companies are increasing orders for Nvidia’s H20 AI chip due to the rising demand for DeepSeek’s cost-effective AI model.
Kress also noted that the Stargate data center project, announced last month by former U.S. President Donald Trump, will utilize Nvidia’s Spectrum X ethernet for networking. The ethernet products are included in the company’s data center segment.
Nvidia reported an adjusted per-share profit of 89 cents, surpassing estimates of 84 cents per share. Revenue for the fourth quarter grew by 78% to $39.3 billion, exceeding estimates of $38.04 billion. Sales within the data-center segment, which accounts for the majority of Nvidia’s revenue, increased by 93% to $35.6 billion in the quarter ending January 26. This growth exceeded estimates of $33.59 billion, although it was lower than the 112% growth recorded in the previous quarter.
