Nvidia shows no signs of AI slowdown after over 400% increase in data center business

Nvidia's historic rally is being driven by its data center business, which grew at a whopping 427% in the latest quarter as companies keep snapping up its artificial intelligence processors.

Now, Nvidia is signaling to investors that the customers spending billions of dollars on its chips will be able to make money off AI, too. It's a concern that's been swirling around the company because there's only so much cash clients can burn on infrastructure before they need to see some profit.

If Nvidia's chips can provide a strong and sustainable return on investment, that suggests the AI boom may have room to run as it moves past the early stages of development, and as companies plan for longer-term projects.

Nvidia's most important clients for its graphics processing units are the big cloud providers — Amazon Web Services, Microsoft Azure, Google Cloud and Oracle Cloud. They made up "mid-40%" of Nvidia's $22.56 billion in data center sales in the April quarter, the company said.

There's also a newer crop of specialized GPU data center startups that buy Nvidia's GPUs, install them in server racks, load them up in data centers, connect them to the internet, and then rent them out to customers by the hour.

For example, CoreWeave, a GPU cloud, is currently quoting $4.25 per hour to rent an Nvidia H100. This kind of server time is essential in large quantities to train a large language model such as OpenAI's GPT, and it's how many AI developers end up accessing Nvidia hardware.

Following Nvidia's better-than-expected earnings report on Wednesday, finance chief Colette Kress told investors that cloud providers were seeing an "immediate and strong return" on investment. She said that if a cloud provider spends $1 on Nvidia hardware, it