RPT-BREAKINGVIEWS-Nvidia’s fantastic rise triggers VC hubris signal

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Robert Cyran

NEW YORK, Nov 19 (Reuters Breakingviews) - Nvidia's NVDA.O third-quarter results reveal a continued streak of incredible growth and profitability. They shed little light on how long it can last. For now, the $4.5 trillion maker of chips and assorted equipment undergirding the boom in artificial intelligence is enjoying insatiable demand. Its forecasts – and, importantly, its plentiful investments in smaller, complementary firms – evince extreme confidence. As the frenzy among telecommunications equipment providers ahead of the dot-com crash proved, though, gear-peddlers are not impervious to over-exuberance.

The company led by Jensen Huang on Wednesday reported $57 billion of revenue for the three months ending in October, an increase of 62% year-over-year. Even more astonishing, its gross margin stands at 74%. Fellow tech giants simply cannot get their hands on enough chips to fill their chatbot-powering data centers. As a result, they must pay up.

Despite all this, Nvidia’s shares trade at about 28 times estimated earnings over the next twelve months, according to LSEG, slightly below their ten-year average. Caution, however, is probably warranted. In a space as nascent as AI, long-term demand is inherently tricky to predict. In the near-term, though, the company’s forecast for $65 billion of revenue next quarter handily beat analysts’ predictions.

That’s thanks to a rush to gobble up enough chips to meet customer demand and avoid missing a single precious step in the race to develop a better AI model. If hype fades, orders can dry up. During the telecom bubble of 1999, internet gear supplier JDS Uniphase’s topline rose 16-fold in eight quarters, only to crash 80% in the next eight.

Then as now, bullish suppliers from former chipmaker darling Intel INTC.O to JDS invested in peers up and down the chain, to gain a bigger piece of the pie and keep the investment wheel spinning. Nvidia on Monday agreed to invest $10 billion in AI-developer Anthropic. In September, it signed about two-dozen agreements, including one to invest up to $100 billion in OpenAI to support data centers filled with Nvidia gear.

Companies, in general, make venture investments when profit is rolling in – and tend to peak when broader economic cycles do. Corporate venture capital arms more than doubled the amounts they raised in the two years prior to 2008 and 2022, the only years in the past two decades that the tech-heavy NASDAQ Index suffered negative annual returns.

When times are good, visions of tantalizing future growth reign supreme. During a bust, sober cost-cutting and a focus on next quarter’s bottom line return to the fore. AI might yet prove to be different from previous periods of exuberance. Yet the crescendo of Nvidia’s investments sounds awfully familiar.

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CONTEXT NEWS

Nvidia said on November 19 that revenue for the third quarter was $57 billion, an increase of 62% from the same period last year. The chip giant earned $31.9 billion, 65% more than it earned in the third quarter of 2025.

(Editing by Jonathan Guilford; Production by Pranav Kiran)

((For previous columns by the author, Reuters customers can click on CYRAN/robert.cyran@thomsonreuters.com; Reuters Messaging: robert.cyran.thomsonreuters.com@reuters.net))