🔒 Graphics-chip maker Nvidia ‘firing on all cylinders’, says CEO- With insights from The Wall Street Journal

Graphics-chip maker Nvidia Corp. is seeing no immediate letup in pandemic-era demand in home computing, videogaming and the use of its chips in big data centers, projecting this quarter to top the record sales it just posted.

Nvidia, which has been among the biggest winners from the changes in how people live their lives during the health crisis, on Wednesday reported fiscal third quarter sales of $4.73 billion, up by 57% from the previous year, generating $2.12 in earnings a share. It also said it anticipated around $4.8 billion in sales in the current quarter, surpassing Wall Street’s expectations.

Chief Executive Jensen Huang has transformed Nvidia over the past decade from a niche player in graphics-processing chips into a major force in artificial intelligence and data-science computing.

Nvidia’s chips are in Nintendo Switch gaming consoles that have been hot commodities during global lockdowns: almost seven million sold in the third quarter, according to Nintendo.

“Nvidia is firing on all cylinders, achieving record revenues in gaming, data center and overall,” Mr. Huang said.

The Santa Clara, Calif.-based company’s shares have more than doubled this year, and Nvidia has surpassed Intel Corp. as the most valuable U.S. semiconductor company.

Leveraging that rise, Mr. Huang wants to expand Nvidia’s focus further with the proposed $40 billion acquisition of U.K.-based chip designer Arm Holdings. Arm’s circuit designs are in almost all smartphones, and its acquisition would instantly open up a new business line for Nvidia.

Nvidia isn’t alone among tech companies anticipating continued pandemic-driven demand for remote-computing services. Microsoft MSFT -1.32% last month reported a healthy rise in sales, driven by its cloud-computing division. Amazon.com Inc., AMZN -0.96% Facebook Inc. and Alphabet Inc.’s Google have all seen demand for digital offerings persist as the pandemic drags on.

Nvidia has prospered also from demand for high-end computer graphics cards that computer gamers prize. The company in September unveiled a new card that quickly sold out, leading to frustration from gamers and an apology from Nvidia.

Its chips are also increasingly being used in supercomputers and data centers, used by companies and scientists to rapidly perform huge numbers of calculations. Nvidia’s graphics chips have proved useful in other tasks as well, including artificial intelligence calculations that underpin popular gadgets like smart speakers and underlie product-recommendation engines.

The company’s data center division sales were $1.9 billion for the quarter, more than double the year-earlier figure. Its gaming division also saw a jump in sales to $2.27 billion, up more than 36%.

Nvidia hasn’t been immune to the effects of the pandemic on the wider global economy, though. Its automotive division has seen several quarters of declines, reflecting disrupted car production and sagging sales as people put off major purchases during the pandemic. Automotive sales were down 23% to $125 million in the quarter.

New U.S. restrictions on dealings with Chinese companies including telecom giant Huawei Technologies Co. pose another threat. Colette Kress, the company’s chief financial officer, said during a call with analysts that revenue in the third quarter from a Chinese customer of Mellanox, a networking company that Nvidia acquired this year for $7 billion, wouldn’t recur in the current quarter, denting revenue forecasts.

Nvidia’s shares fell by about 2% in after-hours trading.

Mr. Huang, however, was bullish on Nvidia’s wider financial outlook given the company’s dominance in the markets for AI computing and computer graphics, among other fast-growing areas in which customers have deeply invested. “We’re going to have a fantastic next year,” he said.

Mr. Huang’s efforts to evolve and grow Nvidia would get a big boost if regulators sign off on its Arm deal, one of a flurry of acquisitions in the semiconductor industry this year.

The proposed transaction, though, has sparked concern in some corners of the chip industry because it would give Nvidia control over the designs that underlie billions of competitors’ products. Virtually all smartphones use Arm’s designs, but they are also increasingly present in server processors and personal computers, including Apple Inc.’s new lineup of Mac computers. Chinese authorities may also look askance at the deal, given that Nvidia is a U.S. company and the technological competition between Washington and Beijing has intensified in recent years.

Nvidia, which has pledged that it won’t interfere with Arm’s neutrality toward its customers, hopes to receive regulatory approval around the end of next year.

Other competitors have seized on the pandemic-fueled rise in their share prices this year to bulk up. Advanced Micro Devices Inc., a competitor of both Nvidia and Intel in graphics chips and central processing units, plans to buy chip maker Xilinx Inc. in an all-stock deal for $35 billion, the companies said in October. Marvell Technology Group Ltd., which makes networking and data storage chips, said the same month that it plans to buy Inphi Corp. in a $10 billion cash-and-stock deal. In July, chip maker Analog Devices Inc. said it would buy rival Maxim Integrated Products Inc. in an all-stock deal valued at more than $20 billion.