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Nvidia’s strong results show AI bubble fears are unfounded

MacDailyNews

Nov 20

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Bubbles rarely pop gradually — they tend to burst. Yet the recent cooling of AI hype has, paradoxically, delivered a welcome reprieve for Nvidia.

Shares of the AI chip giant surged 5% in after-hours trading on Wednesday after the company reported fiscal third-quarter results that eased some investor jitters. The rally provided a sharp rebound from a 10% slide over the prior three weeks, a decline fueled by mounting anxiety over the seemingly limitless capital pouring into artificial intelligence — with no slowdown in sight nearly three years after ChatGPT ignited the boom.

That unease has rippled far beyond Nvidia. The Nasdaq Composite has dropped 5% so far this month, while other AI-heavy names — Advanced Micro Devices, Oracle, and infrastructure player CoreWeave — have suffered even steeper losses. For once, a little air coming out of the AI enthusiasm bubble has actually worked in Nvidia’s favor.

Dan Gallagher for The Wall Street Journal:
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All that clearly got Nvidia’s attention. “There’s been a lot of talk about an AI bubble,” Chief Executive Jensen Huang said Wednesday on the company’s earnings call—marking the first time he or any other Nvidia executive has uttered that phrase during the company’s calls, according to a transcript search by AlphaSense. “From our vantage point, we see something very different.”
That difference was marked mainly by the company’s quarterly data-center sales climbing 66% year over year and topping $50 billion for the first time. That beat Wall Street’s projections for a business segment that is now larger than what most other chip companies produce in total annual revenue. The company’s adjusted operating margin rose by a percentage point from the quarter that ended in May, despite its efforts to boost production of its technically ambitious Blackwell family of AI systems.
“The No. 1 take is they are a machine,” said Sean O’Hara, president at Pacer ETFs.
The law of large numbers hasn’t seemed to catch up to Nvidia yet. Huang last month projected $500 billion in sales for just two generations of the company’s AI chips over a two-year period ending next year. Nvidia typically refrains from projecting beyond a single quarter ahead, but it suggested Wednesday that such an aggressive target could actually prove conservative.

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MacDailyNews Take: Plenty of room to run.

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