Nvidia shares rose on Thursday after the chip giant's revenue guidance reassured investors that AI demand will remain strong.
Shares were last up 7.2% in premarket trading. Investor bullishness suggests Nvidia could buck the trend of its stock dropping the day after reporting earnings in all of the previous four quarters, despite meeting or beating estimates.
Chip stocks rallied following Nvidia earnings. Micron rose 4.5%, Marvell 5.7%, Arm 4.7%, Intel 3% and AMD 1.7%. Shares of neocloud firms also rose, with Nebius and CoreWeave up around 7.5% and 6% in premarket trading, respectively.
Nvidia CFO Colette Kress said on Wednesday that the company expects revenue growth of 70% for fiscal 2028, which runs from February 2027 to January 2028. CEO Jensen Huang said demand "is much greater than 70%," but the company is constrained on the amount of product it can supply.
TSMC, Nvidia's main manufacturer, continues to face supply constraints, while memory chips — a key component of Nvidia's systems — also remain in short supply.
On Thursday, analysts also pointed to a "threat" to Nvidia's near monopoly over the most advanced AI chips by recently announced custom semiconductors built by hyperscalers and AI labs like OpenAI.
Nvidia boosts AI optimism
Huang said that Nvidia has "never forecasted" a year in advance, but that the company has "a lot greater visibility now" across the supply chain to do so.
Nvidia's forecast comes at a time when investors remain nervous about capital expenditure from large tech companies, the circular nature of financing deals, and the return from AI investments.
The tech giant's commentary around AI demand appeared to calm down some of those fears.
Huang said AI "reached its inflection point," noting that the number of companies that need large clusters of GPUs has expanded dramatically.
"This time last year, one lab alone was driving the buildout," Huang said. "Today, we have a golden age of new AI labs and startups, multiple frontier labs scaling in parallel, a thriving open-model ecosystem and physical AI coming online — with strong momentum across the U.S. and around the world."
The company also sought to show investors that its revenue base was diversifying its customer base beyond just hyperscalers. Nvidia's AI Clouds, industrial, and enterprise (ACIE) customers accounted for $40.3 billion in sales in the quarter, up 138% on an annual basis.
Nvidia's earnings results "tell you that the valuation today is cheap," Siddy Jobe, senior portfolio manager, Exponential Technologies Fund at Econopolis Wealth Management, told CNBC's "Squawk Box Europe" on Thursday. "There is plenty, plenty of upside in the Nvidia share."
While fears of a market correction were raised when chip stocks shed $1 trillion in July before recovering, confidence appeared to be back on the agenda after Nvidia reported its earnings.
"I continue to be very bullish on Nvidia and this entire ecosystem," Paul Meeks, head of technology research at Freedom Capital Markets, told CNBC's "Squawk Box Asia" on Thursday. "I don't think we have really a threat of a slowdown until we get into 2028 earliest."
Nvidia has agreed to buy open-source platform Hugging Face for $12.9 billion, The Information reported on Wednesday, citing a person with knowledge of the deal. Business Insider separately reported that Nvidia had been "in talks" to acquire Hugging Face.
If completed, the acquisition would put one of the most widely used platforms for sharing and working with open-source AI models under Nvidia's ownership, expanding the chipmaker's reach further into the software and model ecosystem.
