Nvidia sales boosted by rise in AI models that ‘reason’
27 February 2025, 12:04
The company pointed to the increased popularity of such models as a key factor in its success.
AI chip giant Nvidia’s sales have remained strong despite the rise of DeepSeek because new AI models that “reason” are driving sales, the company said.
The US tech giant revealed on Wednesday night that it had beaten analyst expectations in its latest financial results, reporting 39.3 billion dollars (£31.02bn) in revenue – up 78% on the same period last year.
This rise was despite the company briefly losing 595 billion dollars (£469bn) in market value earlier this year following the sudden appearance of Chinese AI firm DeepSeek, which claimed to have developed models on a par with US market leaders but for a fraction of the cost and using lower priced Nvidia chips.
Nvidia has seen its value rocket in the last year as the AI boom has taken hold and its chips – a vital source of the compute power needed to run the most powerful AI models – have become more in demand.
But as Nvidia chief executive Jensen Huang noted after the firm published its results on Wednesday night, the latest trend in AI for reasoning models – chatbots that essentially show their thinking and workings as they answer queries – requires even more compute power and are therefore still driving demand up for Nvidia products.
AI firms including OpenAI, DeepSeek and Anthropic have all started to roll out reasoning models, which they say take longer to think, breaking down problems into smaller ones and then trying to solve them step by step, something the AI industry calls chain of thought reasoning.
Mr Huang said demand for Blackwell – the firm’s top-of-the-line chips – was “amazing” because reasoning-based AI models were processing more data and therefore needed more power to achieve better results.
“Reasoning AI adds another scaling law – increasing compute for training makes models smarter and increasing compute for long thinking makes the answer smarter,” he said.
Alvin Nguyen, senior analyst at Forrester, said making this point was a “good verbal counter” to Nvidia investor concerns about DeepSeek upending the AI market landscape.
“Having yet another record performance from Nvidia seems commonplace despite the enormity of the feat,” he said.
“The record earnings represent the continued demand for Nvidia AI products.
“The emphasis on reasoning models driving more, not less, computation is a good verbal counter to the worries about DeepSeek impacting their demand.”
Mr Huang even congratulated DeepSeek on its rise, saying its reasoning model had “ignited global enthusiasm”.
“It’s an excellent innovation, but even more importantly, it has open-sourced a world-class reasoning AI model,” he said.
Nearly every AI developer is applying (DeepSeek’s reasoning model) R1, or chain of thought and reinforcement learning techniques like R1, to scale their models’ performance.
