Nvidia CFO Says Revenue Will Top First-Quarter Guidance


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Nvidia CFO Colette Kress said that the chip maker was on track to report sales above its $5.3 billion forecast for its fiscal first quarter. The company also announced its first data center CPU.


Dreamstime

Chip maker

Nvidia

gave investors two reasons to cheer Monday. The company announced its first line of data-center processors, and it expects to exceed its revenue forecast for the current quarter.

Nvidia (ticker: NVDA) stock advanced 6.5% to $612.88 in late afternoon trading, as the

PHLX Semiconductor index,

or Sox, fell 1.2%.

During its investor day, Nvidia Chief Financial Officer
Colette Kress
 said that the company was on track to report sales above its $5.3 billion forecast for its fiscal first quarter. Kress did not specify the amount, but said that the company is expecting to cryptocurrency-mining chip sales of $150 million, compared with its prior guidance of $50 million.

“We are experiencing broad-based strength, with all our market platforms driving upside to our initial outlook,” Kress said. The CFO added that Nvidia expects the high demand for chips to continue throughout the year, which will translate into reduced inventory—though Kress still expects the company to have enough supply to support “sequential growth beyond Q1.”


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In addition to the financial forecast, Nvidia also surprised investors with a product announcement earlier Monday: a central processing unit, or CPU, designed specifically for data centers. Based on technology Nvidia will license from acquisition target Arm Holdings, the server chip is designed for artificial intelligence applications and supercomputing.

The new server chip, called Grace, means Nvidia will more closely compete with rival chip makers

Intel

(INTC) and

Advanced Micro Devices (AMD),

both of which have dominated data centers with their x86-based processors. Nvidia already makes graphics and data processing units (GPUs and DPUs, respectively) that are used by companies and scientists to crunch AI data, among other things.

“Coupled with the GPU and DPU, Grace gives us the third foundational technology for computing, and the ability to re-architect the data center to advance AI,” chief executive
Jensen Huang
said. “Nvidia is now a three-chip company.”

Cascend analyst Eric Ross raised his Nvidia target price to $660 from $640 Monday. Ross wrote in the note that Intel likely has little to worry about, because of the company’s vast market share–it currently controls more than 90% of the data center CPU market. Nonetheless, Intel shares fell 4.1% to $65.05 after the announcement Monday around 12 p.m. Eastern time.

For AMD, things could be more challenging, since the company is attempting to wrest market share from Intel, and will now have to compete with Nvidia in two years when the Grace chips launch. AMD shares retreated 5.1% to $78.60 in late afternoon trading.

Nvidia said last year that it intends to buy Arm for $40 billion. The deal, which may close in 2020, faces a gauntlet of regulatory approvals in order to succeed. Barron’s has previously written positively about the deal, arguing that if it manages to close the transaction, it may be one of the few ways to challenge Intel’s dominance. Nvidia does not need the acquisition to close to make the Grace data center chips, it only needs a license from Arm.

Shares of Nvidia rose 131% in the past year, as the PHLX Semiconductor index gained 103%. The

S&P 500 index

climbed 48% in the same period.

Write to Max A. Cherney at max.cherney@barrons.com