Nvidia's growth is no longer relying only on Google, Meta and Amazon

If the AI bubble, to the extent that it exists, bursts, it will not happen in the coming quarters. The second-quarter report published by Nvidia yesterday indicates not only that the chip giant — whose activity is a central barometer for the AI industry — has not slowed down, but that it remains on an acceleration path, where the most significant limitation to its growth is not demand from customers, but supply chain constraints on its ability to meet this demand in full.

The data published by Nvidia were exceptional, even relative to the company's own previous quarters. Revenue rose by 106% to $96.2 billion. Net profit by 126% to $59.69 billion. These are growth rates that one might expect to find in small startups or young companies that have just gone public, with much lower absolute revenues and profits. Not in the largest company in the world, which has been recording a very high double-digit growth rate for several consecutive quarters.

This growth is almost exclusively responsible for the company's data center activity, which recorded an increase of 117% to revenue of $89.02 billion. These are distributed relatively evenly between revenues from hyperscalers — tech and cloud giants that each invest hundreds of billions a year in AI infrastructure ($48.71 billion, an increase of 102%), and many smaller players with more modest investments, which together accumulate to a significant mass: $40.31 billion, an increase of 138%. From Nvidia's perspective, this is excellent news, showing that the company is not completely dependent on chip purchases by companies like Google, Meta and Amazon, which in turn seek greater independence through the development of their own chips that could compete with and replace Nvidia's chips.

Nvidia's communications and networking activity, which is based primarily on the company's Israeli R&D center, also recorded a successful quarter with record revenue that grew by 18% compared to the sequential quarter to $17.7 billion. According to Nvidia, as a result, it is now the world's largest networking products company.

But the company's most significant news concerns its future growth. For the current quarter, Nvidia expects revenue of between $105.84 billion and $110.16 billion, which will represent an increase of between 85.7% and 93.2% compared to the same quarter last year. For the 2028 fiscal year, Nvidia expects an increase in sales of 70%. On the face of it, this is a slowdown in the growth rate. However, in absolute terms, it is still a huge increase in sales in the volume of tens of billions of dollars per quarter. And more importantly, according to the company, the slowdown is not due to a slowdown in demand. CFO Colette Kress explained in a call with analysts after the report was published that this is a forecast limited by the supply chain.

Founder and CEO Jensen Huang added:

"Although our demand is much higher than 70%, our supply chain allows us to confidently deliver 70% growth. We will continue to work with our supply chain to increase this. But we want to be consistent with everyone — customers, shareholders, the supply chain, so that everyone sees the same thing. This is important because everyone is investing a lot of resources. There is a huge year ahead of us, and it will be truly exceptional."

Until now, Huang's most optimistic predictions have proven to be correct, and even more so. This is also in light of sharp warnings from analysts regarding the circular economy that has developed in the AI ecosystem, and the lack of a business model that would support the huge investments in AI infrastructure. The company's current forecast is expected to increase confidence in the market and push concerns about a bubble even further down.