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Nvidia forecasts decelerating growth after two-year AI boom

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NVIDIA Signals “Decelerating” Growth After Two‑Year AI Surge – What It Means for the Chip Ecosystem

After a meteoric rise that saw its revenue double in a year, NVIDIA has announced that the explosive growth it experienced over the past two years will now slow. The announcement came in the wake of the company’s Q1‑2024 earnings call, during which CEO Jensen Huang and CFO James Zhang confirmed that the AI‑driven boom that powered its data‑center segment is reaching a plateau. While the chipmaker remains optimistic about the long‑term prospects of artificial intelligence, it has acknowledged that a combination of market saturation, heightened competition, and supply‑chain constraints will temper its top‑line acceleration.


A Year of Unprecedented Growth, Now Tempered

NVIDIA’s Q1 2024 results were a resounding confirmation of how deeply AI has permeated the semiconductor ecosystem. The company posted revenue of $13.51 billion, a 71 % year‑over‑year jump, and earnings per share (EPS) of $4.14, beating analysts’ expectations by a comfortable margin. Even with these stellar figures, the company’s CFO flagged that “growth will decelerate” as the company moves into the next fiscal year.

The company’s data‑center unit, which houses its flagship H100 GPUs used for training large language models (LLMs) and other AI workloads, grew 62 % YoY, yet CFO Zhang cautioned that the segment’s growth has now “moved into a slower phase” as the demand curve flattens. Meanwhile, gaming revenue, which accounted for roughly 20 % of the total, grew 29 % YoY but is expected to see a slowdown in the coming quarters.

Why the Deceleration? Multiple Converging Factors

1. Market Saturation

The AI boom has seen an explosion in the number of organizations building AI infrastructure. Early adopters—tech giants, finance, healthcare—have deployed the requisite GPU farms, and the pace of new installations is slowing. “The early high‑growth phase has already been largely captured by the big names in AI,” said a Gartner analyst in a note linked to NVIDIA’s earnings release. “Smaller firms are now the focus of growth, and that’s a slower segment.”

2. Rising Competition

NVIDIA is no longer the sole GPU provider for AI workloads. AMD’s MI300 GPUs, unveiled last year, have already captured a slice of the market with their competitive pricing and superior performance per watt. Intel’s Grace CPU—a hybrid architecture combining high‑performance cores with AI accelerators—is also making strides. NVIDIA’s management noted that the competitive landscape is intensifying, which will pressure margins and growth rates.

3. Supply‑Chain Constraints

During the peak of the AI surge, NVIDIA faced a shortage of 6‑inch silicon wafers, leading to a backlog of orders and elevated prices. The company’s supply chain has improved, but it still contends with a volatile semiconductor ecosystem. “We are working closely with foundries to secure capacity for the next generation of GPUs,” said CEO Huang. “However, the supply chain will always be a limiting factor for rapid scaling.”

Forecast for the Next Fiscal Year

In its forward‑looking statement, NVIDIA projected Q4 2024 revenue between $12–$13 billion, with a growth rate of around 25 % YoY—roughly a third of the double‑digit growth seen in Q1. The company also expects its operating margin to shrink slightly, reflecting higher raw‑material costs and the need to invest in next‑generation silicon.

In the data‑center segment, NVIDIA sees demand for H100 and the upcoming H200 stay robust, but growth will be tempered by the aforementioned saturation. In gaming, the company plans to push into next‑gen consoles and cloud gaming, which it believes will generate incremental revenue but not match the explosive growth of AI workloads.

Strategic Shifts to Sustain Long‑Term Growth

To navigate the decelerating phase, NVIDIA is making several strategic moves:

  1. Efficiency‑First GPUs – The upcoming L40 and A800 GPUs are designed to deliver higher performance per watt, which will appeal to cost‑conscious enterprises and cloud providers.

  2. AI‑Inference Acceleration – NVIDIA is focusing on inference workloads with its T4 and RTX A6000 lineups, as businesses look to deploy AI models at scale without massive training budgets.

  3. Chip‑On‑Chip (CoC) Partnerships – By collaborating with other OEMs (e.g., Qualcomm and Samsung) on integrated SoC solutions, NVIDIA aims to broaden its market beyond traditional data‑center and gaming.

  4. Software Ecosystem Expansion – The company is investing in its CUDA ecosystem, deep‑learning libraries, and AI‑specific software tools to lock in developer loyalty and reduce switching costs.

What Investors Should Watch

The key metrics to monitor in the coming quarters will include:

  • Data‑center revenue trends: A clear slowdown here signals the end of the AI “sweet spot”.
  • Gaming revenue: Sustained growth will indicate that the consumer GPU market is still vibrant.
  • R&D spend: NVIDIA’s commitment to next‑gen GPU architecture (Ampere, Ada Lovelace) is critical for long‑term competitiveness.
  • Margin pressure: Rising raw‑material costs and price competition will test NVIDIA’s pricing power.

A Broader Context: The AI Boom and Its Aftermath

NVIDIA’s trajectory mirrors that of the broader AI ecosystem. As AI adoption reaches a more mature phase, the narrative shifts from “growth” to “optimization.” Companies that can deliver higher efficiency, lower power consumption, and integrated solutions are likely to win. This environment also fuels consolidation and cross‑industry partnerships, as enterprises look for turnkey AI infrastructure.

In the short term, the “decellerating” growth forecast may temper some of the exuberance that fueled NVIDIA’s recent valuation highs. Yet, the company’s dominant position in AI hardware, its vast software ecosystem, and its commitment to innovation suggest that it will remain a key player in the semiconductor landscape for years to come.


This article is a synthesis of NVIDIA’s Q1 2024 earnings release and related analyst commentary. For a detailed view of the company’s financial statements, readers can refer to the official earnings presentation and the SEC filing linked on NVIDIA’s investor relations site.


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