Nvidia's Stock Stumbles Despite Strong Earnings as CEO Expresses AI Anxiety

Nvidia's stumbles may ease CEOs' AI anxiety

Good morning. At the start of this year, when chipmaker Nvidia was a slip of a thing that hovered around $48 a share, conversations about AI felt tinged with existential angst. Many leaders said they were all in, eager to learn more and vowing to disrupt themselves, lest they be disrupted. We all assumed the impact was going to be big -- so big that a majority of AI experts polled predicted there was at least a 5% chance it would cause human extinction. Interest remains strong in AI and Nvidia, which is still up 150% this year after reporting a minor production snag amid strong earnings yesterday, and up almost 3,000% in the past five years. But the mood around the speed of disruption and the immediate impact on business has shifted. More familiarity with generative AI has brought more comfort in understanding how to use it. There's also more awareness of AI's limitations, from the softball questions at a Google staff meetings and bots spreading disinformation to employee distrust and regulation. When I'm speaking to leaders, I often ask how they're doing in AI. One CEO in the finance sector recently told me that he felt relieved when a new AI tool didn't quite work as planned: "It gave us some breathing room to go at a more human pace." Another told me they're doing smaller projects to incorporate customer feedback before making whole scale changes. Add in the time and expense needed to label data and train workers. That doesn't diminish the long-term impact of AI or its leading player. Nvidia CEO Jensen Huang said yesterday that he's "seeing the momentum of generative AI accelerate." We're seeing a company that's doing well but looking a little more down-to-earth, beset with the same employee issues and production snafus as the rest of us. The person who first put Nvidia on my radar screen is John Chambers, the former CEO of Cisco. When I helped him write a book several years ago, he said Nvidia was well-positioned to be a leader in AI. He ought to know: Cisco became the most valuable company on the planet during his tenure. Then the dot.com bubble burst, Cisco shares dropped almost 90% from their high, and Chambers had to rebuild. Today, Cisco is a successful company with numerous competitors. Some wonder if that could be the trajectory of this era's tech superstars. Crowdstrike CEO George Kurtz emphasized the "resilience" of his staff after the cybersecurity company reported $969.3 million in second quarter earnings on Wednesday, only slightly below analyst predictions. The company previously cautioned that their earnings would be lower than expected after an update to its software last month caused 8 million computer systems to malfunction. Fortune Berkshire Hathaway hits $1 trillion Berkshire Hathaway officially became the first non-tech company in the U.S. to reach a market cap of $1 trillion on Wednesday. Class A shares in the conglomerate, run by 93-year-old Warren Buffett, were selling for a record of more than $699,000. Fortune No coffee runs Mineral Resources CEO Chris Ellison has already banned working from home. Now he's urging employees to stay parked at their desk inside the Australian company's HQ, which is outfitted with a cafe, restaurant, and gym. "I don't want them leaving the building," he says. "So I don't want them walking down the road for a cup of coffee. We kind of figured out a few years ago how much that costs." Fortune Wall Street's AI darling Super Micro postponed earnings while under short seller's microscope by Will Daniel Gen Z is actually taking sick days, unlike their older coworkers. It's redefining the workplace by Sasha Rogelberg Klarna has 1,800 employees it hopes AI will render obsolete by Ryan Hogg Meta has abandoned efforts to make custom chips for its upcoming AR glasses by Kali Hays Temu's billionaire founder lost his title as China's richest person just 20 days after winning it by Sydney Lake Why Honeywell has placed such a big bet on Gen AI by John Kell Google now uses AI to moderate staff meetings and employees say it asks softball questions by Marco Quiroz-Gutierrez

Nvidia's CFO says the 'Enterprise AI wave' has begun and Fortune 100 companies are leading it

Good morning. Nvidia released its highly-anticipated earnings report on Wednesday after the bell. And "enterprise" was a word that CFO Colette Kress emphasized during the earnings call. Nvidia is the dominant maker of graphics processing units (GPUs) chips, which are now a critical tool for accelerating AI. Its revenue for the quarter ended July 28 was $30 billion, up 15% from the previous quarter and up 122% from a year ago. Net income was $16.6 billion up from $6.2 billion the same time last year. The results were driven by sales of Nvidia's Hopper GPU, the company said. The chipmaker delivered gross profit margins of 75.1% and adjusted earnings per share of 68 cents, up from 27 cents a year ago. Although Nvidia topped Wall Street's expectations, NVDA shares slipped almost 7% in after-hours trading following the earnings announcement. "Nvidia's overall performance signals that investors recognize the significance of AI, particularly in sectors where infrastructure and hardware are essential," Natalie Hwang, founding managing partner of Apeira, a venture capital asset manager, told me. "However, the broader market may still underappreciate the full scope of AI's potential beyond these foundational technologies." A lot of the demand for Nvidia is coming from "tens of thousands" of companies and startups building generative AI applications for consumers, education, advertising, enterprise, healthcare and robotics, Kress, who is an EVP as well as Nvidia's CFO, said on the earnings call. "The Enterprise AI wave has started," Kress said. Enterprises drove sequential revenue growth in the quarter, she said. "We are working with most of the Fortune 100 companies on AI initiatives across industries and geographies." Applications that are fueling Nvidia's growth, include AI-powered chatbots and generative AI co-pilots to "build new, monetizable business applications and enhance employee productivity," she said. Large enterprises are focusing on AI, according to research. The Rise of Generative AI in SEC Filings, a new report by Arize finds that over half (64.6%) of Fortune 500 companies mention AI in their most recent annual report. And more than one in five enterprises specifically reference generative AI. Software and tech industries and financial services companies mention generative AI the most, according to the report. However, more than two-thirds (69.4%) of companies mentioning generative AI do so in the context of risk of disclosures. That can range from risk through the use of emerging technology, or the risk of failing to keep pace with competitors who are using AI, or security risk to the business. According to some analysts, the tech giant's earnings report was a make-or-break moment. My Fortune colleague Christiaan Hetzner's report explains why Nvidia's earnings have taken on such outsize importance. Its stock price has been fueling record highs in the broader S&P 500 and Nasdaq indexes in recent weeks. The company's total value tops $3 trillion. And Nvidia has a dominant position in producing GPUs. "Nvidia is the bellwether in the broader AI trade precisely because it is leagues ahead of the competition, controlling roughly 90% of the global market in AI training and inference chips," he writes. Although Nvidia's rise may only mark the beginning, many companies across industries are "poised to benefit from AI advancements," Hwang told me. "AI GPU demand is way outstripping supply for Nvidia at this juncture," Wedbush Securities analysts wrote in a note to investors this morning. "And the Street should come away from these results as a very bullish indicator for the broader tech sector, with more shock and awe, rather than a shrug of the shoulders, in our view." Also on Wednesday, Berkshire Hathaway had a big day. My colleague Greg McKenna shares his report about it in "Big Deal" below. Sheryl Estrada [email protected] The following sections of CFO Daily were curated by Greg McKenna Gary Chase was appointed CFO of Viasat (Nasdaq: VSAT), a satellite communications company, effective Sept. 16. He will succeed Shawn Duffy, who will remain at the company as chief accounting officer. Chase arrives from Delta, where he spent more than 12 years. He most recently served as SVP of operational finance and was a member of the airline's top leadership committee. Before Delta, Chase served as a managing director and equity analyst at Barclays and Lehman Brothers. James D. Allison was appointed CFO of human resources provider Insperity (NYSE: NSP), effective Nov. 15. He will succeed Douglas S. Sharp, who is retiring after 21 years in the role. Allison, who currently serves as chief profitability officer and EVP of comprehensive benefit solutions, first joined the company in 1997. Berkshire Hathaway reached a $1 trillion market capitalization on Wednesday, almost 65 years after Warren Buffett bought a struggling New England textile manufacturer and eventually transformed it into one of the world's biggest conglomerates. Berkshire is the seventh U.S. company to join the "Trillion Dollar Club." The rest of its American members are all tech giants. Buffett's company, therefore, is distinct for its old-school holdings, counting Geico Insurance, Dairy Queen and BNSF Railway among its subsidiaries. Buffett, who turns 94 on Friday, has used his long-term, value-oriented approach to produce incredible returns. From 1965 to the end of 2022, Berkshire's stock rose 3,787,464%, far outpacing the S&P 500's 24,708% gain. Is Your Organizational Transformation Veering Off Course? is a new report from the Harvard Business Review. A study from EY and the University of Oxford's Saïd Business School polled 846 senior leaders and 840 workforce members involved in transformations, 96% of whom said such initiatives all face significant challenges that can derail the program. The authors found successfully navigating a turning point makes a transformation 1.9 times more likely to overperform its target key performance indicators. "Not only can we do more with less, but we can do much more with less. Internally, we speak directionally about 2,000 [employees]. We don't want to put a specific deadline on that." -- Sebastian Siemiatkowski, CEO of Swedish buy-now, pay-later giant Klarna, told the Financial Times about the company's plans to eventually halve its workforce with AI-driven cuts.