Nvidia shares soar nearly 30% as sales forecast jumps and AI booms

© Reuters. FILE PHOTO: The logo of technology company Nvidia is seen at its headquarters in Santa Clara, California February 11, 2015. REUTERS/Robert Galbraith

By Chavi Mehta and Stephen Nellis

(Reuters) -Nvidia Corp on Wednesday forecast second-quarter revenue more than 50% above Wall Street estimates, and said it is boosting supply to meet surging demand for its artificial-intelligence chips, which are used to power ChatGPT and many similar services.

Shares of Nvidia (NASDAQ:NVDA), the world's most valuable listed semiconductor company, rocketed as much as 28% after the bell to trade at $391.50, a record high. The gain increased Nvidia's stock market value by about $200 billion to over $950 billion, extending the Silicon Valley company's lead as the world's most valuable chipmaker and Wall Street's fifth-most-valuable company.

Nvidia has strained to meet demand for its AI chips, with Tesla (NASDAQ:TSLA) Inc Chief Executive Officer Elon Musk, who is reportedly building out an artificial-intelligence startup, earlier this week telling an interviewer that the graphics processing units (GPUs) are "considerably harder to get than drugs."

But Nvidia Chief Executive Officer Jensen Huang told Reuters in an interview on Wednesday that the company had started full production of its latest AI chips in August last year, which gave it some buffer for supplies when chatbot apps exploded in popularity.

"In January, the new demand was incredibly steep," Huang said. "We had to place additional orders, and we procured substantially more supply for the second half" of 2023.

Nvidia forecast current-quarter revenue of $11 billion, plus or minus 2%. Analysts polled by Refinitiv had forecast revenue of $7.15 billion.

"Given the generative AI gold rush taking place, this should fuel demand for Nvidia's chips for the remainder of the year," said Edward Jones analyst Logan Purk.

Adjusted revenue for the quarter ended April 30 was $7.19 billion. Analysts polled by Refinitiv were expecting revenue of $6.52 billion. The company's data center chip sales hit $4.28 billion, beating analyst estimates of $3.89 billion, according to segment data from FactSet.

Nvidia faces competition in AI chips from traditional rivals like Advanced Micron (NASDAQ:MU) Devices Inc and Intel Corp (NASDAQ:INTC) , as well as from startups such as Cerebras Systems and the in-house AI chip efforts at companies like Alphabet (NASDAQ:GOOGL) Inc's Google and Amazon.com (NASDAQ:AMZN) .

But Huang said Nvidia has shifted toward selling entire AI supercomputing systems, rather than just chips, to large companies that want to own - and are willing to pay for Nvidia's prices and gross margins - AI expertise comparable to Silicon Valley's tech giants.

"No company can build a state-of-the-art AI datacenter without the technology and all the software of a (cloud computing provider), but we have all that capability," Huang said. "The enterprise is a very, very different market."

Gaming chip revenue beat Wall Street expectations at $2.24 billion versus estimates of $1.97 billion, according to FactSet data.

Net income rose to $2.04 billion, or 82 cents per share, from $1.62 billion, or 64 cents per share, a year earlier. Excluding items, the company earned $1.09 per share in the first quarter, beating estimates of 92 cents.