NVIDIA CEO emphasizes that enterprise AI adoption is the primary driver of data center growth and GPU demand.
Nvidia CEO Jensen Huang attributed the chipmaker's ongoing recovery to enterprise adoption of GPUs for artificial intelligence, identifying "two near-term drivers" for growth: AI for edge applications and conversational interfaces. On the company's second-quarter earnings call on Thursday, Huang stated: "We are building a broad base of customers across multiple industries as they adopt GPUs to harness the power of AI." He further described the expansion of AI adoption, saying "We are seeing that the wave of AI is going from the cloud to the enterprise to the edge to the autonomous systems." Despite a double-digit revenue decline for the quarter, all of Nvidia's businesses showed signs of recovery from the previous quarter.
Nvidia's data center business, which focuses on server GPUs optimized for artificial intelligence and other workloads, dropped 14 percent year-over-year while growing a modest 3 percent sequentially to $655 million. Huang attributed the year-over-year revenue drop to lower demand from two unnamed cloud service providers, while sequential growth came from enterprises expanding their AI workloads. Nvidia's CFO Collette Kress noted that while enterprises drove sequential growth, "other cloud service providers, or hyperscalers, were flat while some were increasing their demand for Nvidia's data center GPUs." She added: "We believe that our continued growth with the industries is important for us in the long term for the expanded use of AI." Examples of enterprise adoption include a large retailer using data center GPUs to reduce the time to create forecasting models for product demand from weeks to hours, and growing numbers of startups using GPUs to create AI-based products and services including delivery robots, chat bots and fraud detection systems.
Nvidia's gaming business, the company's largest segment consisting of graphics cards for PCs and chips for consoles like the Nintendo Switch, saw a 27 percent decline year-over-year in second-quarter revenue but increased 24 percent from the previous quarter to $1.3 billion. Huang said adoption of the chipmaker's RTX graphics cards, which are the first in the industry to provide real-time ray tracing, have "reached a tipping point," noting that "more PC games are adopting the cinema-quality rendering technique that makes games look more realistic." The automotive unit and professional visualization segment were the only two segments that grew both annually and quarterly in the second quarter, with automotive revenue increasing to $209 million and professional visualization rising 4 percent to $291 million from the same period last year.
Nvidia's second-quarter revenue was $2.58 billion, marking a 17.3 percent decrease from the same period last year but a 16 percent sequential increase and exceeding Wall Street's expectations by $30 billion. The company's net earnings were $1.25 per share, beating analyst estimates by 9 cents. Looking ahead, Nvidia predicted $2.9 billion in revenue for the third quarter, plus or minus 2 percent, which would mark a roughly 6.5 percent decrease year-over-year. The chipmaker's stock price was up as much as 6 percent in after-hours trading Thursday.