Nvidia forecast first-quarter revenue above market estimates on Wednesday, expecting strong demand for its leading AI chips to persist as businesses spend heavily to expand generative artificial intelligence infrastructure.
Its shares sank roughly 1% in choppy extended trading, after closing up 3.7% in regular trading. Nvidia is the biggest beneficiary of a rally in AI-linked stocks, with its shares up more than 400% over the last two years.
Because of the effort to ramp the company’s flagship Blackwell AI chips, Nvidia forecast first-quarter gross margins will sink to 71%, below the 72.2% forecast by Wall Street, according to data compiled by LSEG.
Demand has grown for Nvidia’s advanced chips that can speedily process the large amounts of data used by generative AI applications, as companies race each other to emerge as leaders of the new technology. Generative AI is a type of artificial intelligence that can learn from data and improve over time.
Nvidia’s forecast also helps allay doubts around a slowdown in spending on its hardware that emerged last month, following Chinese AI startup DeepSeek’s claims that it had developed AI models rivaling Western counterparts at a fraction of their cost.
This could add fuel to the sputtering AI rally after the Magnificent Seven stocks’ tumultuous retreat from their late-2024 peaks as Wall Street’s optimism waned under the shadow of DeepSeek’s innovations.
Nvidia reported adjusted per-share profit of 89 cents, compared with estimates of 84 cents a share. Revenue for the fourth quarter grew 78% to $39.3 billion, beating estimates of $38.04 billion.