Nvidia says quarterly profit rose 211% as big tech buys AI chips

In short: Nvidia reported that its profit jumped 211% from a year earlier, largely because major technology companies are buying large amounts of its AI chips.

What's going on

Nvidia is a US chipmaker best known for graphics chips, but its fastest growth now comes from chips used in data centers. These data centers are large buildings full of computers that run online services. In this case, they also run AI systems.

The company said its profit in its most recent quarter rose 211% compared with the same quarter a year ago. That kind of triple digit growth has shown up repeatedly for Nvidia since 2023. The main driver is demand for its data center graphics processing units, or GPUs (specialized chips that act like powerful engines for AI).

Big cloud and internet companies like Microsoft, Amazon, Google, and Meta buy these GPUs in huge volumes. They use them to build their own AI features, like chat tools and improved search. They also rent computing power to other businesses through cloud services like AWS, Azure, and Google Cloud, which is similar to renting out heavy machinery instead of buying it.

Nvidia also benefits because it has been able to ship more of these high end chips as manufacturing and packaging capacity has increased. These AI chips sell at high prices, so profits can rise faster than revenue.

What to watch

A key question is whether the biggest buyers keep spending at the same pace. Another is whether supply stays strong, since delays in making and packaging chips can limit how many systems can be built.

Source: NYTimes