Nvidia's strong forecast eases AI bubble concerns — for now

Nvidia projected quarterly revenue far above Wall Street expectations on Wednesday, with CEO Jensen Huang highlighting surging demand for the company’s AI chips from major cloud providers.

The upbeat outlook sent Nvidia shares up 5% in after-hours trading, positioning the company to gain roughly $220 billion in market value.

The results helped ease, at least briefly, investor anxiety that the rapid expansion of AI spending may be outpacing underlying fundamentals. Markets worldwide have been looking to Nvidia as a key indicator of whether massive investments in AI infrastructure point to real long-term growth or an emerging bubble.

Before the earnings report, concerns over an overheated AI market had pushed Nvidia shares down nearly 8% in November, following a staggering 1,200% rise over the past three years. The broader S&P 500 has dropped nearly 3% this month.

“Blackwell sales are off the charts, and cloud GPUs are sold out,” Huang said. “The AI ecosystem is scaling fast — with more foundation model makers, more startups, and more industries embracing AI across the world.”

Addressing bubble concerns, Huang told analysts: “There’s been a lot of talk about an AI bubble. From our vantage point, we see something very different.”

Nvidia now expects fiscal fourth-quarter revenue of about $65 billion, plus or minus 2%, well above analysts’ average estimate of $61.66 billion, according to LSEG data. Third-quarter revenue rose 62%, marking the first acceleration in nearly two years.

Data-center revenue — Nvidia’s most important business segment — reached $51.2 billion for the quarter ending October 26, beating analysts’ forecasts of $48.62 billion.

Still, some analysts warned the strong results may not fully silence debate over whether AI spending is sustainable.

“The concern that AI infrastructure spending growth is not sustainable is not likely to ebb,” said Stifel analyst Ruben Roy.

Tech giants such as Microsoft and Amazon continue to invest heavily in AI data centers. Some investors argue these companies may be artificially bolstering earnings by extending depreciation schedules for AI computing hardware, including Nvidia’s chips.

Possible challenges ahead

Analysts noted that factors beyond Nvidia’s control could limit future growth.

“While GPU demand continues to be massive, investors are increasingly focused on whether hyperscalers can actually put this capacity to use fast enough,” said Jacob Bourne of eMarketer. “There could be physical bottlenecks in power, land availability, and grid access that slow revenue growth into 2026 and beyond.”

Nvidia’s sales also became more concentrated in the third quarter, with four customers accounting for 61% of revenue — up from 56% the previous quarter.

At the same time, Nvidia sharply increased spending on renting back its own chips from cloud-service partners, with such commitments rising to $26 billion, more than double the previous quarter’s $12.6 billion.

Even so, demand for AI chips remains widely expected to stay strong. Since the launch of ChatGPT in late 2022, demand for high-performance processors has fueled Nvidia’s explosive growth. Huang said last month that Nvidia has $500 billion in bookings for advanced chips stretching through 2026.

The company forecast an adjusted gross margin of 75% for the fourth quarter, plus or minus 50 basis points. Analysts had expected about 74.5%.