It was the ‘will they, won’t they’ of the earnings world. Wall Street watched on as chipmaker Nvidia reported its earnings. And they only went and smashed it. You read it here first: AI is the next big thing.

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Nvidia surges after saying AI has hit a ‘tipping point’

Nvidia shares jumped after the company posted earnings that beat estimates and declared that AI has hit a ‘tipping point’. The chipmaker said revenue increased by 265% in the fourth quarter and demand will continue to outpace supply for the rest of the year. It gave a revenue outlook of about $24 billion, compared to average analyst estimates of below $22 billion.

Investors are interpreting the results as a sign of confidence in AI more broadly. Nvidia supplier TSMC, server component supplier Super Micro Computer, and Dutch chip equipment manufacturer ASML all rose following the earnings announcement.

Nvidia is increasingly gaining an outsized impact on broader markets. It’s been the single biggest driver of this year’s S&P 500 rally, responsible for about a quarter of the index’s gains – Nvidia shares are up nearly 40% this year after tripling in 2023.

The stock passed a $1 trillion market cap in the middle of last year, as revenue doubled to more than $60 billion in the last fiscal year and net income closed in on $30 billion. Nvidia is now the fifth-largest US company. It has become so significant that some investors were anticipating this earnings report would carry market-wide risk like inflation data would.

Founded in 1993 as a provider of graphics cards for video games, Nvidia has become a proxy for AI demand. ChatGPT is trained and run on thousands of the company’s H100 accelerators. The chip has become legendary in the tech world, with businesses vying to get their hands on them. Meta has said it plans to bring its stock of H100s to 350,000 this year.

But while Big Tech makes up nearly 40% of Nvidia’s revenues, it’s not just Silicon Valley giants queueing up to buy its chips. The company says its customers have diversified as more industries invest in AI hardware, with industries including automotive, financial services, and healthcare now spending at a “multibillion-dollar level.” Sovereign nations including Japan, Canada, and France are becoming larger Nvidia customers as they use citizen data to create AI models.

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