Tech Morning: Nvidia's Growth Slows, AI Competition Heats Up

While Nvidia remains the dominant player in AI chips, its latest earnings show signs of slowing growth and increasing competition. We'll also look at Amazon's Alexa revamp, and DeepSeek's pricing strategy.

Story of the Day

Nvidia's Mixed Outlook as AI Spending Boom Continues

Nvidia reported mixed fourth-quarter results, exceeding revenue expectations but providing a cautious outlook that dampened investor enthusiasm. While Q4 revenue hit $39.3 billion (matching analyst predictions), the company's forecast for the current quarter and its projected profit margins fell short of expectations. This is the smallest margin by which the company has exceeded the expectations since Feb 2023.

CEO Jensen Huang addressed concerns about slowing data center spending and the rise of competitors like DeepSeek, but the results suggest Nvidia's era of consistent blockbuster earnings may be waning.  Analyst Logan Purk noted that the guidance was "slightly underwhelming," though the early success of Nvidia's new Blackwell chip should ease some concerns.

Nvidia's data center unit remains its powerhouse, generating $35.6 billion in sales (beating estimates of $34.1 billion), but gaming revenue fell short.  The company's dominance is so significant that its data center division now generates more revenue than Intel and AMD combined.

Huang remains bullish on AI's long-term growth, predicting strong growth in 2025.  He also argued that DeepSeek's model, which relies on "fine-tuning," will increase demand for Nvidia's products, potentially requiring "millions of times more computing power" than current methods. However, the rollout of Blackwell has impacted profit margins, though CFO Colette Kress expects improvements by year-end.

Essential Reads

DeepSeek's Off-Peak AI Pricing: Chinese AI startup DeepSeek is offering significant discounts (up to 75%) for accessing its AI models via API during off-peak hours (12:30 AM to 8:30 AM China time). This move is a response to high demand straining its servers, and positions DeepSeek as a price competitor to OpenAI.

Amazon's AI-Powered Alexa+: Amazon unveiled Alexa+, a major overhaul of its Alexa voice assistant, integrating generative AI. Alexa+ (free for Prime members, $19.99/month for others) can store preferences, make reservations, and connect to Amazon products. This move is Amazon's bid to revitalize Alexa and compete with AI-enhanced assistants from Apple and Google. It leverages Anthropic and Bedrock.

Canada to Levy Fee on Google: Canada's broadcast regulator (CRTC) will impose a fee on Google starting April 1st to finance enforcement costs related to Canada's online-news law. This comes amid heightened trade tensions with the U.S., and trade experts warn it could exacerbate the situation.

Salesforce's Q4 Earnings: Salesforce reported weaker-than-expected quarterly revenue and issued a forecast below analysts' estimates, causing the stock to slip 4% in extended trading. The company highlighted its Agentforce AI agent technology, with CEO Marc Benioff hinting at a new product in the IT service management space.

Market Impact

Nvidia: Shares dipped less than 1% in late trading on Wednesday.

Amazon: Shares rose 1.7% during regular trading.

Salesforce: Shares slipped 4% in extended trading due to the weaker-than-expected revenue and forecast.

Key Quotes

• Panos Panay (Amazon's Head of Devices and Services): "Alexa knows almost every instrument in your life, your schedule, your smart home, your preferences, the devices you're using, the people you're connected to, the entertainment you love and uses many of the apps you use, a lot of the services you need."
• Marc Benioff (Salesforce CEO): "A lot of other vendors are talking about their agent capabilities, but few are able to show that they’ve got this really running at scale."
• Jensen Huang (Nvidia CEO): "We're at the beginning of reasoning, AI and inference, time scaling, but we're just at the start of the age of AI. Multi-modal AI enterprise AI, sovereign AI, and physical AI are right around the corner."