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In Q2, Nvidia proved to be the biggest winner in the generative AI boom

Nvidia’s second-quarter earnings, released Wednesday after markets closed, show that selling generative AI boom picks and shovels can be lucrative.

A new computing era has begun. Nvidia founder and CEO Jensen Huang said companies worldwide are moving from general-purpose to accelerated computing and generative AI.

Huang is right. Nvidia dominates generative AI supply. AI applications like OpenAI’s ChatGPT use the company’s A100 and H100 AI chips. Demand for these demanding applications has grown steadily over the last year, and infrastructure is shifting to support them.

Huang said several cloud service providers will use Nvidia H100 AI hardware in their data centers, and enterprise IT system and software providers have partnered to bring Nvidia AI to every industry.

“The race is on to adopt generative AI,” he said.

In the second quarter, Nvidia earned $13.51 billion, beating Wall Street expectations and double the $6.7 billion it earned last year. Yahoo Finance analysts expect $11.22 billion in Q2 revenue.

Nvidia reported a ninefold increase in GAAP net income to $6.18 billion from $656 million the year before. Even after reporting $2.04 billion in first-quarter earnings, Nvidia’s net income soared. Quarterly earnings per diluted share were $2.48, up 854% from last year. Yahoo Finance analysts predicted $2.09 EPS.

The results show its business has changed drastically. The company’s gaming unit once drove revenue. Gaming is growing—Q2 revenue was $2.49 billion, up 22% from last year—but its data center unit is outperforming it. Nvidia’s data center business earned $10.32 billion, up 141% from the previous quarter and 171% from last year.

Huang said earlier this month at a SIGGRAPH keynote in Los Angeles that the company made an existential business decision in 2018 to adopt AI-powered image processing like ray tracing and intelligent upscaling (RTX and DLSS).

That bet won. Even more growth is predicted by Nvidia.

The company predicted third-quarter revenue of $16 billion, plus or minus 2%.

“The world has something along the lines of about a trillion dollars’ worth of data centers installed in the cloud,” Huang said on Wednesday’s earnings call. “And trillions of dollars of data centers are transitioning to accelerated computing and generative AI. Two platform shifts are happening simultaneously.”

Currently, accelerated computing is the most cost-effective, energy-efficient, and performant method. Generative AI-enabled computing has arrived.

“This incredible application now gives everyone two reasons to transition to a platform shift from general purpose computing — the classical way of doing computing — to accelerated computing,” he said.

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