Nvidia’s Huang: AI Compute is Revenue, Dismissing Bubble Fears

Nvidia CEO Jensen Huang continues to assert the fundamental strength of the AI market, dismissing concerns about a potential bubble as investors scrutinize capital expenditures among major cloud providers. During Nvidia’s fourth-quarter earnings call, Huang emphasized that compute power is now directly linked to revenue generation in the age of AI.

AI Compute Drives Revenue Growth

Responding to analyst questions about the sustainability of capital expenditures by cloud customers – which are nearing $700 billion annually – Huang stated that the ability to generate AI tokens is now essential for revenue growth. “In this new world of AI, compute is revenues. Without compute, there’s no way to generate tokens. Without tokens, there’s no way to grow revenues,” he explained. He expressed confidence in the continued cash flow growth of these companies due to the increasing demand for AI capabilities.

Record Fourth-Quarter and Full-Year Results

Nvidia reported record revenue of $68.13 billion for the fourth quarter of fiscal 2026, exceeding guidance by approximately $3 billion. This represents a 73% increase year-over-year and a 20% increase from the third quarter. The company too provided guidance for the first quarter of fiscal 2027, projecting revenue of $78 billion, significantly above analyst forecasts of $72.6 billion. Total supply-related commitments rose sharply from $50.3 billion at the end of the third quarter to $95.2 billion at the end of the fourth quarter, indicating strong future demand.

Gross Margins Exceed Expectations

Investors closely monitored Nvidia’s gross margins, which rose to 75% in the fourth quarter, surpassing guidance and increasing from 73.4% in the previous quarter. Non-GAAP gross margin reached 75.2%. This performance signals a recovery in margins, with the company aiming to maintain them “in the mid-70s” going into fiscal year 2027.

Financial Highlights

• GAAP net income increased 35% quarter-over-quarter and 94% year-over-year to roughly $43 billion.
• GAAP diluted earnings-per-share rose 35% to $1.76 for the quarter, nearly doubling compared to fiscal 2025.
• Full-year revenue reached $215.9 billion, up 65% from the previous year.
• Data center revenues for fiscal 2026 were $197.3 billion, up from $115.2 billion the prior year.

Addressing AI Investment Concerns

Huang directly addressed concerns about a potential AI bubble, stating that the industry is undergoing three structural shifts: from CPUs to GPUs, from traditional machine learning to generative AI, and from generative AI to agentic AI. He argued that each transition justifies substantial investment. He previously stated that the industry has fully funded the first two shifts through cost reductions and revenue growth, while agentic AI represents a new layer requiring further investment.

Future Outlook and Strategic Partnerships

Nvidia is strategically securing inventory and capacity to meet demand beyond the next several quarters. The company also revealed it is nearing a partnership with OpenAI, building on a previously outlined potential $100 billion AI infrastructure effort Business Insider.

Key Takeaways

• Nvidia’s strong financial results reinforce the sustained demand for AI hardware.
• Jensen Huang believes AI compute is directly correlated to revenue generation.
• Concerns about an AI bubble are dismissed by Nvidia’s leadership.
• The company is strategically positioned to capitalize on the growing AI market.