Nvidia delivered another solid quarterly performance, reinforcing its dominance in AI infrastructure while also highlighting the gradual slowdown in its breakneck growth.
The company reported fourth-quarter revenue of $39.33 billion, up 78% year-on-year, surpassing market expectations of $38.25 billion. Its data center segment remained the primary growth driver, generating $35.6 billion, a 93% increase from the previous year and above estimates of $34.09 billion. Nvidia’s compute segment, which includes AI-focused GPUs, more than doubled to $32.56 billion, underscoring the unrelenting demand from cloud providers and enterprises building AI models.
Despite these strong results, shares fell 1.5% in after-hours trading, suggesting a muted market reaction. This likely reflects a combination of factors, including concerns over slowing revenue growth, tighter profit margins, and continued geopolitical risks. While Nvidia has consistently delivered stellar financial performance, investors are now scrutinising whether it can maintain its exceptional growth trajectory in an environment where the pace of AI infrastructure build-out may normalise.
The company’s gaming division saw revenue decline 14% to $2.5 billion, falling short of $3.02 billion expectations. Meanwhile, automotive revenue more than doubled to $570 million, reflecting the growing adoption of AI in self-driving and connected vehicle technology. Gross margins came in at 73.5%, in line with estimates but lower than last year’s 76.7%, as higher production costs and the transition to its next-generation Blackwell AI chips weighed on profitability.
Looking ahead, Nvidia provided a first-quarter revenue forecast of $43 billion (±2%), slightly ahead of analysts’ estimates of $42.26 billion. However, expected gross margins of 70.5%-71.5% came in below market expectations of 72.1%, suggesting short-term profitability challenges. The ramp-up of Blackwell production is increasing costs in the near term, though Nvidia expects efficiency improvements to drive margin recovery later in the year.
CEO Jensen Huang remains optimistic about the AI boom, emphasising the strong demand for Blackwell chips, which contributed $11 billion in sales during their first quarter of availability. He highlighted that AI computing is evolving rapidly, with models requiring exponentially more compute power for both training and inference tasks. Despite concerns around potential AI efficiency improvements reducing GPU demand, Huang suggested that new AI use cases—such as autonomous AI agents—will continue to fuel long-term growth.
However, investor sentiment remains cautious. Nvidia’s growth rate is naturally slowing due to the law of large numbers, making it increasingly difficult to maintain its previous triple-digit growth rates. Additionally, geopolitical risks remain a concern, with U.S. restrictions on AI chip sales to China cutting Nvidia’s revenue from the region in half to 15% of total sales. The uncertain regulatory landscape, including potential tariffs on Taiwan-made chips, adds further complexity to Nvidia’s international operations.
Another potential headwind is the competitive landscape. The emergence of DeepSeek’s AI model, which claims to use far fewer GPUs while maintaining high performance, has sparked fears that AI firms may shift toward more compute-efficient architectures. If true, this could reduce Nvidia’s pricing power in the AI chip market. However, Huang dismissed these concerns, arguing that advanced AI models will still require massive computational resources, which should sustain strong demand for Nvidia’s high-end chips.
Despite these challenges, Nvidia remains at the centre of the AI revolution, benefiting from massive infrastructure spending by tech giants such as Microsoft, Amazon, and Google, who are expected to spend $65 billion to $100 billion on AI-driven data center expansion in 2024. While margin pressures and regulatory uncertainties could introduce some volatility, the fundamental demand for Nvidia’s AI chips remains exceptionally strong. Investors will now be watching whether Nvidia can continue scaling Blackwell production efficiently and whether data center spending remains resilient in the coming quarters.
