Nvidia Corp.

, the world’s most valuable company, gave a tepid revenue forecast for the current period, signalling that growth is decelerating after a staggering two-year boom in

artificial intelligence

spending.

Sales will be roughly US$54 billion in the fiscal third quarter, which runs through October, the company said in a statement Wednesday. Though that was in line with the average Wall Street estimate, some analysts had projected more than US$60 billion.

Analysts largely looked past the outlook, with at least 10 firms raising their 12-month price targets after the results Wednesday. They raised the estimates by an average of three per cent to US$202.60, according to data compiled by Bloomberg, implying a gain of about 12 per cent from Wednesday’s close.

Nvidia shares fell 1.9 per cent at 9:52 a.m. in New York on Thursday after briefly rising at the open. They had rallied 35 per cent this year through the close, lifting the company’s market capitalization above US$4 trillion.

During a conference call with analysts Wednesday, the company’s leadership rejected the notion that interest in deploying AI infrastructure was flagging.

“The opportunity ahead is immense,” chief executive Jensen Huang said. “We see US$3 trillion to US$4 trillion in AI infrastructure spend by the end of the decade.”

Sales in the second quarter, which ended July 27, rose 56 per cent to US$46.7 billion. That compared with an average estimate of US$46.2 billion. Though the gain added more than US$16 billion in quarterly revenue from a year earlier, it was the smallest percentage increase in more than two years.

Second-quarter profit was US$1.05 a share, minus certain items. Wall Street was looking for US$1.01.

The data centre unit, a division that is now larger by itself than any other chipmaker, had sales of US$41.1 billion. That compares with an average estimate of US$41.3 billion. Gaming-related revenue was US$4.29 billion. Analysts projected US$3.8 billion on average. The automotive segment generated US$586 million in sales, a bit shy of estimates.

The results showed hints that spending by giant data centre operators “could tighten at the margins if near-term returns from AI applications remain difficult to quantify,” Emarketer analyst Jacob Bourne said in a note.

Nvidia is still dealing with the fallout from a growing U.S.-China rivalry, where semiconductor technology has become a major flashpoint. In April, the Trump administration tightened restrictions on exports of data centre processors to Chinese customers. Washington has subsequently rolled that back, saying that the U.S. will allow some shipments in return for a 15 per cent slice of the revenue.

At the same time, Beijing has encouraged a move away from using U.S. technology in AI systems accessed by

the Chinese government

. The shifting policies have made it difficult for Wall Street to predict how much revenue Nvidia might be able to recover in the market.

Heading into the earnings report, Nvidia analysts had a roughly US$15 billion gap between their highest and lowest estimates for third-quarter revenue — one of the largest such ranges in the history of the company.

Nvidia said it didn’t record any sales of its H20 AI chip to China-based customers in the second quarter, a decline of about US$4 billion in revenue from the prior period. The third-quarter forecast excluded H20 sales as well.

Nvidia also noted that the U.S. government hasn’t yet codified its plan to take a 15 per cent cut of revenue from China AI chip sales. And it acknowledged risks to enacting the policy.

“Any request for a percentage of the revenue by the USG may subject us to litigation, increase our costs, and harm our competitive position and benefit competitors that are not subject to such arrangements,” Nvidia said in a filing.

Ultimately, US$2 billion to US$5 billion in H20 chips could be shipped to China in the current quarter, Nvidia said.

The company continues to urge the U.S. government to approve a version of the more up-to-date Blackwell chip for sale in China, chief financial officer Colette Kress said during the conference call.

If Nvidia was allowed to ship more capable products to the Asian nation, it would be able to take advantage of a US$50 billion opportunity there, Huang said. Huge demand for AI systems in China means that market is set to grow at 50 per cent a year, he said.

Nvidia is on course for annual sales of US$200 billion — with the number estimated to eclipse US$300 billion by 2028. That would give the company about a third of the chip industry’s total revenue.

But Nvidia is largely dependent on the spending plans of just a few companies.

Microsoft Corp.

, Amazon.com Inc. and other giant data centre operators account for about half of its sales. To diversify the business, Huang is pushing into new markets and providing a wider range of products, including complete computers, networking gear, software and services.

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For now, the Santa Clara, Calif.-based company is largely unchallenged in the market for its AI chips, known as accelerators.

But the company faces other headaches including the availability of supply. Like most chipmakers, Nvidia doesn’t own factories and relies on outsourced production. Ramping up production of new technology remains an ongoing challenge.

Bloomberg.com