Nvidia’s ‘Blockbuster’ Earnings Overshadow Debate on AI Spending Profitability

(Seoul=Yonhap Infomax) Ji Yeon Kim – Nvidia Corp. (NASDAQ: NVDA), the leading artificial intelligence (AI) chipmaker, posted blockbuster third-quarter results, sending markets into a frenzy. However, analysts warn that the crucial debate over whether Big Tech’s massive capital expenditures on AI infrastructure will ultimately prove profitable has been pushed to the back burner.

CNBC reported on the 19th (local time), “The real debate over whether today’s enormous capital investments will remain profitable in the future remains unresolved. Investors are largely ignoring this issue, instead focusing on Nvidia’s stunning growth and driving up shares of Nvidia-related stocks.”

Following Nvidia’s earnings release, after-hours trading saw a sharp rally in AI-related stocks, including Nvidia, Advanced Micro Devices Inc. (NASDAQ: AMD), and Broadcom Inc. (NASDAQ: AVGO).

Dan Ives, Head of Technology Research at Wedbush Securities, commented, “Tonight, the market and tech stocks are celebrating Nvidia’s strong results and outlook as if popping champagne.”

However, CNBC cautioned that, “While Nvidia continues to deliver impressive revenue and guidance each quarter, most companies investing billions in graphics processing units (GPUs) are still grappling with how to monetize AI,” urging caution against excessive AI optimism.

Adam Crisafulli, strategist at Vital Knowledge, noted, “The real issue is whether this level of capital expenditure is economically sustainable. This question will remain a burden on the market for a long time.”

Michael Burry, the investor who inspired the film ‘The Big Short,’ has argued that major hyperscalers—large-scale AI data center operators—are underestimating depreciation costs by assuming longer useful lives for semiconductors than is realistic.

Even after Nvidia’s earnings announcement, Burry wrote on his social media platform X (formerly Twitter), “The idea that depreciation periods could be extended stems from confusing physical utilization with value creation, simply because chips older than three or four years are still in operation.”

He added, “Just because equipment is in use does not mean it is profitable. US Generally Accepted Accounting Principles (GAAP) are based on economic benefit.”

Intensifying competition also poses a risk to Nvidia’s dominance. David Russell, Global Market Strategist at TradeStation, said, “Nvidia’s results are very strong, but largely in line with expectations. Considering that Alphabet Inc. (NASDAQ: GOOGL), Google’s parent company, hit record highs thanks to AI models that do not use Nvidia’s Blackwell chips, investors may now be considering shifting their focus to other stocks.”

Nvidia announced that its fiscal third-quarter revenue (August–October) surged 62% year-on-year to a record $57.01 billion, surpassing market expectations of $54.92 billion.

Revenue from the data center segment soared, accounting for nearly 90% of total sales and jumping 66% year-on-year to an all-time high of $51.2 billion.

jykim@yna.co.kr

(End)