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By Max A. Cherney, Arsheeya Bajwa and Stephen Nellis
(Reuters) -Nvidia's strong growth forecast for the first quarter on Wednesday signaled that booming demand for its artificial intelligence chips was intact, and the company said orders for its new Blackwell semiconductors were "amazing."
The company's forecast helps allay doubts around a slowdown in spending on its hardware that emerged last month, following Chinese AI startup DeepSeek's claims that it had developed AI models rivaling Western counterparts at a fraction of their cost.
Its shares rose, before declining slightly in choppy extended trading, after closing up 3.7% in regular trading. Nvidia is the biggest beneficiary of a rally in AI-linked stocks, with its shares up more than 400% over the last two years.
CEO Jensen Huang struck an optimistic note saying "AI is advancing at light speed," and that "demand for Blackwell is amazing," in commentary that should bode well for AI-related stocks that have taken a hit in the past week.
"We’ve successfully ramped up the massive-scale production of Blackwell AI supercomputers, achieving billions of dollars in sales in its first quarter," he said.
Nvidia is undergoing a critical product transition as it moves to a new chip architecture called Blackwell, shifting from selling individual chips to full AI computing systems that integrate graphic chips, processors and networking equipment.
The Santa Clara, California-based company generated $11 billion of revenue from Blackwell-related products in the fourth quarter, roughly 50% of the company's overall data center revenue.
The company expects total revenue of $43 billion, plus or minus 2% for the first quarter, compared with analysts' average estimate of $41.78 billion, according to LSEG.
"Unlike previous quarters, there was heightened skepticism going into this report due to concerns about DeepSeek's efficient model and questions surrounding the Blackwell rollout," said eMarketer analyst Jacob Bourne. "But the results have removed the doubts."
The Blackwell ramp-up has been complicated and costly, weighing on the company's margins, however.
Nvidia on Wednesday forecast first-quarter gross margin slightly below expectations - it will sink to 71%, below the 72.2% forecast by Wall Street, according to data compiled by LSEG. Still, Nvidia's Chief Financial Officer Colette Kress said on a conference call that Nvidia would return to the mid-70% gross margin range later in the fiscal year as it further increased production of its Blackwell chips, lowering costs.