Shares of Nvidia (NVDA 2.26%) rose as much as 5.1% on Thursday after the AI (artificial intelligence) chip designer posted another blowout quarter and offered upbeat guidance. Investors also seemed encouraged by CEO Jensen Huang's efforts to calm AI bubble concerns during the company's earnings call.
Image source: Nvidia.
Blowout quarter and bullish outlook
Nvidia's fiscal third-quarter revenue climbed to $57 billion, up 62% year over year and 22% from the second quarter. That marks an acceleration from 56% revenue growth in the prior quarter.
Data center revenue reached $51.2 billion, up 66% year over year and 25% sequentially, as demand for Blackwell-based systems stayed extremely strong. Management also guided for roughly $65 billion of fourth-quarter revenue, implying mid-teens sequential growth.
On the earnings call, Huang pushed back on fears that the AI boom is a speculative bubble, telling investors, "There has been a lot of talk about an AI bubble. From our vantage point, we see something very different." He argued that the world is undergoing three major platform shifts at once and that Nvidia is positioned to benefit as computing moves toward GPU-accelerated systems and AI becomes embedded in more applications.
NASDAQ: NVDA
Key Data Points
Powerful business, demanding valuation
Nvidia trades at about 46 times earnings -- a steep premium to the broader market. That valuation multiple is easier to defend while revenue is rising more than 60% year over year and margins stay unusually high, but it leaves little room for slip-ups.
Still, management's forecast for another strong quarter, along with its conviction that AI demand will continue to compound, supports a bullish long-term thesis. Given the company's incredible growth and compelling economics, the business is clearly attractive -- and an investment at this valuation may make sense. But investors should keep any positions in the stock small in light of the stock's high valuation, which adds an element of risk and will likely lead to very volatile trading.
