Nvidia Is on Top But AMD Awaits in the Metaverse

After the bell on Wednesday, NVIDIA Corporation NVDA reported its third-quarter results that reflected strong demand for its artificial intelligence chips, allowing the chipmaker to beat expectations for both earnings and sales, as well as issue a strong forecast for the undergoing quarter.

Third Quarter Figures

For the quarter that ended on October 31^st, revenue grew 50% YoY as it amounted to $7.10 billion, topping the expected $6.82 billion and resulting in adjusted earnings per share of $1.17, exceeding the expected $1.1. Earnings grew 60% YoY.

Data Centers Gains

Success in data centers powered a company once known primarily for personal-computer game chips to remake its fortune. The segment's sales grew 55% from $1.9 billion in the same quarter last year to 2.9 billion due to GPU sales to cloud providers such as Amazon.com, Inc AMZN AWS, Microsoft Corporation's MSFT Azure, and Alphabet Inc's GOOG Google Cloud, with these titans being referred to as "hyperscale customers". CFO Colette Kress said that customers are being used for AI applications to understand human speech and crunch data to provide customer recommendations.

Gaming Remains Its Biggest Market

The segment grew 42% from last year's comparable quarter to $3.2 billion, primarily due to increased sales of GeForce consumer graphics processors. But supply remains limited.

Crypto

Earlier this year, Nvidia introduced dedicated graphics cards for crypto mining to help meet some of the demand but its gaming graphic cards can no longer be used for cryptocurrency mining due to new software. It reportedly sold $105 million in cryptocurrency-specific graphics cards, down from the August quarter's $266 million.

Automotive

The segment remains a small part of its sales with latest quarter sales amounting to$135 million as they grew 8% annually but dropped 11% from the previous quarter. The sequential decline reportedly occurred because automakers had other supply constraints.  However, self-driving programs using its processors continue to ramp up, according to the report.

Meanwhile, rival chipmakers are investing heavily on this front, hoping it will become a multibillion-dollar market over the next decade.

Professional Visualization

The product line that primarily consists of high-end graphics processors for professionals grew 144% annually to $577 million as firms continue buying powerful laptop workstations for their staff's home offices.

Coming to a Metaverse Near You

Last week, Nvidia CEO Jensen Huang hinted that the company will be one of the main suppliers for building the virtual world that is expected to help grow the business world to unprecedented heights by creating advertising, commerce, and recreational opportunities. Nvidia already introduced the "Omniverse Enterprise" software that can be used to create virtual characters, interpret speech and create new 3D worlds.

But in this brave new virtual world, NVIDIA is likely to compete with Advanced Micro Devices AMD more directly. Last week, AMD revealed that Meta Platforms FB is a new customer for its Epyc server processors. AMD is certainly smaller, but its run has been just as impressive. The bigger picture is that market's two hottest chip makers have plenty of addressable markets ahead, even if Facebooks' metaverse dreams do not come true.

A UK National Security Probe

NVIDIA is in the process of purchasing Arm, a British vendor for core mobile semiconductor technology but last month, the European Commission opened an in-depth investigation of the $40 billion takeover. On Wednesday, Kress said that the company was in talks with the U.S. Federal Trade Commission to address their concerns.

Although both regulators and some Arm licensees showed concern with some even objecting to the takeover, management continues to believe in the potential of the acquisition.

Guidance

For the undergoing quarter that will end in January, NVIDIA expects to report around $7.4 billion, exceeding analyst expectations of $6.86 billion. With its shares rising more than 123% year to date, the company is having a great run while enjoying great demand that exceeds its capacity, especially for its hard-to-find GeForce graphics card that is highly sought-after by gamers.

With a market capitalization of more than $750 billion, Nvidia is now the most valuable company in the semiconductor space, along with being seventh-most-valued in the S&P community. Metaverse developments are making its prospects even brighter.

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