Nvidia CEO Jensen Huang shrugs off DeepSeek and China challenge; chipmaker rakes in record profits amid AI frenzy

Nvidia, the leading AI chipmaker, has once again shattered expectations, posting a remarkable surge in quarterly profits even as questions arise over its future in the midst of emerging competition from Chinese AI firm DeepSeek.

Financial Strength Amid Market Jitters

Despite concerns that DeepSeek’s cost-efficient artificial intelligence (AI) training methods could disrupt Nvidia’s dominance, the chipmaker reported a 78% year-on-year increase in revenue for the three months ending January 27, reaching an impressive $39.3 billion. The company’s net income stood at $22.06 billion, surpassing analysts’ expectations of $19.57 billion, while adjusted per-share profit hit 89 cents, outperforming the estimated 84 cents.

Sales from Nvidia’s data centre division, its primary revenue driver, soared 93% to $35.6 billion, exceeding Wall Street’s forecast of $33.59 billion. This segment, which had recorded 112% growth in the previous quarter, remains the bedrock of Nvidia’s expansion.

DeepSeek's Challenge and Investor Sentiment

DeepSeek had rattled the AI landscape last month when it revealed that its AI models, which it claimed were more advanced than OpenAI's ChatGPT, were trained using less advanced and more affordable chips.

This announcement triggered a sharp sell-off in Nvidia shares, causing ripples across the market. However, investor anxiety eased after major tech giants, including Meta and OpenAI, reaffirmed their commitment to Nvidia’s AI infrastructure and chipmaking prowess.

During the earnings call following its quarterly results, Nvidia CEO Jensen Huang downplayed the threat from DeepSeek, stressing that the nature of software development has fundamentally shifted.

“We know fundamentally software has changed,” Huang said, emphasising that future AI advancements will demand Nvidia’s specialised chip architectures rather than conventional “hand-coding” methods.

Blackwell Chips: The Fastest Product Ramp in Nvidia’s History

Key to Nvidia’s continued success is the aggressive rollout of its latest Blackwell architecture chips. Chief Financial Officer Colette Kress revealed that fourth-quarter sales of Blackwell chips exceeded company expectations, contributing $11 billion in revenue—the fastest ramp-up of any product in Nvidia’s history.

Nvidia's Blackwell architecture is its latest generative AI-focussed chip platform, designed to accelerate machine learning and high-performance computing. It offers significant improvements in efficiency, scalability, and processing power, catering to the growing demand for AI applications.

Blackwell's rapid adoption, especially by cloud service providers, has fuelled Nvidia’s record-breaking revenue growth.

“Blackwell sales were led by large cloud service providers, which represented approximately 50% of our data centre revenue,” Kress noted in the earnings call.

Future Outlook and Market Position

Looking ahead, Nvidia forecasts total revenue of $43 billion for the current quarter, plus or minus 2%, outpacing analysts’ estimates of $41.78 billion. However, the company expects its gross margin to dip slightly to 71%, below Wall Street’s 72.2% projection.

The Santa Clara-based tech behemoth continues to dominate the AI chip sector, despite regulatory challenges limiting its exports to China. While demand in China remains muted due to U.S. trade controls, Nvidia is experiencing strong momentum in Europe, driven by investments from France and the European Union, the company noted in its filing with the Securities and Exchange Commission (SEC).

Nvidia’s Stock Performance: Volatility with Long-Term Gains

As the torchbearer of the AI revolution, Nvidia’s meteoric rise has turned it into Wall Street’s second-largest company, boasting a market capitalisation of over $3 trillion. Just two years ago, the company’s valuation stood below $600 billion. Despite a 5% decline in share price on a year-to-date basis, Nvidia has delivered a staggering 66% return over the past year and an eye-watering 400% gain over the last two years.

On Wednesday, Nvidia shares closed at $131.28, up nearly 5% from the previous day's closing.