The Numbers

Nvidia posted a profit of $31.9 billion in its most recent quarter. That's up 65% from a year earlier and 245% from the year before that.

Only Google parent Alphabet made more money among tech giants in the same quarter.

Total revenue hit $57 billion, topping Wall Street's $55.2 billion estimate. Sales of chips for AI data centers rose 44% to $51 billion.

The Forecast

Nvidia projected current quarter revenue will rise 65% year-over-year to $65 billion. That blew past Wall Street's forecast of $57 billion.

The strong forecast suggests the company can keep growing fast even as total sales mushroom.

Shares rose nearly 5% in after-hours trading. Finance chief Colette Kress noted tech companies have increased data center spending to $600 billion this year, up more than $200 billion from their plans at the start of the year.

The AI Bubble Worries

"There's been a lot of talk about an AI bubble," CEO Jensen Huang said during a call with analysts. He added that the AI Nvidia is helping create is "transformational."

The eye-popping profit could calm Wall Street nerves. There are growing concerns that lavish spending is getting ahead of demand for Silicon Valley's AI products and services.

The S&P 500 is down 3.6% since Nvidia hit its $5 trillion milestone three weeks ago. Nvidia shares have fallen 10% during that time, though they're still up 34% this year.

The Circular Deal Problem

Nvidia has worried investors with investments in some customers that buy its chips. The deals raise questions about whether Nvidia is paying itself.

The company announced it would invest $100 billion in OpenAI. The startup receives that money as it buys or leases Nvidia's chips.

Tuesday, Nvidia announced a similar deal with Anthropic. Nvidia will invest $10 billion. Anthropic will buy $30 billion in AI computing backed by Nvidia chips.

Goldman Sachs estimates Nvidia will make 15% of next year's sales from what critics call circular deals.

Huang's Defense

Huang defended the investments. He said they expand Nvidia's software system and let the company work at a deeper technical level with AI startups.

"We're getting a share of investment in what will be a very successful company, oftentimes a once-in-a-generation company," he said.

The Competition

Nvidia faces questions about increased competition. AMD recently struck its own deal with OpenAI. Qualcomm made a deal to sell AI products to Saudi Arabia.

Huang remains optimistic. Last month, he said Nvidia expects $500 billion in sales through the end of next year. That would more than double what it made over the previous two years.

The Saudi Deal

Nvidia completed a deal to sell up to 150,000 chips to Amazon and Humain for data centers in Riyadh. The deal will result in Saudi Arabia buying 400,000 to 600,000 chips over three years.

"Each country will fund their own infrastructure," Huang said.

The China Problem

Nvidia's sales are growing even while blocked from selling to China. Beijing has discouraged Chinese companies from buying Nvidia's chips.

Trump's advisers discouraged him from weighing in on the issue for national security reasons when he recently met with Xi Jinping. Trump said Huang would have to negotiate directly with the Chinese.

The Bottom Line

Nvidia's $31.9 billion profit and forecast for $65 billion in current quarter revenue calmed AI bubble fears on Wall Street, though concerns remain about circular deals where the company invests in customers who then buy its chips.