On March 18, 2024, Nvidia founder and CEO Jensen Huang demonstrated products at the annual Nvidia GTC Artificial Intelligence Conference held at the SAP Center in San Jose, California.
Josh Adelson | AFP | Getty Images
At the beginning of last week, the technical leader of OpenAI personally thanked Nvidia Chief Executive Jensen Huang “brought us the most advanced” chips needed to run the demo to showcase the company’s latest artificial intelligence model.
A day later, at Google’s annual developer conference, letter CEO Sundar Pichai emphasized the company’s “long-term partnership with Nvidia,” noting that Google Cloud will use the chip maker’s Blackwell graphics processing units (GPUs) in early 2025.
And this week, MicrosoftThe company that provides servers for OpenAI will announce new AI advancements and features developed on the company’s massive Nvidia GPU clusters. The company is hosting a build conference in Redmond, Washington.
When it reports quarterly earnings on Wednesday, Nvidia finds itself at the center of the technology industry, a position that has become increasingly common for the 31-year-old company, which has seen its market capitalization surge to more than $2 trillion this year.
According to LSEG, Nvidia is expected to achieve more than 200% year-over-year revenue growth for the third consecutive quarter, and analysts expect first-quarter earnings to rise 243% to $24.6 billion. More than $21 billion of that is expected to come from Nvidia’s data center business, which includes the company’s sales to Google, Microsoft, Yuan, AmazonOpenAI, etc.
Nvidia squeezes huge profits from its suite of AI products and expects net profit to increase more than fivefold from the same period last year to $13.9 billion.
The stock has soared 91% this year after more than tripling in 2023.
Dan Niles, founder of Niles Investment Management, compared Nvidia’s role in the artificial intelligence boom to “building the Internet” in the 1990s. Cisco central role at that time. Niles said that over the course of three years, Cisco experienced several major corrections but ultimately grew 4,000% to reach its peak in 2000.
“We’re still in the early stages of building artificial intelligence,” Niles said Monday on CNBC’s “Money Matters.” “I think over the next three to four years, revenue will grow three to four times from where it is today, and I think stocks will also grow.”
Google, Amazon, Microsoft, Meta and apple Bernstein estimates that a total of $200 billion in capital spending is expected to be spent this year, with a large portion of that spending going toward artificial intelligence-specific infrastructure such as Nvidia chips.
Elsewhere, OpenAI’s latest chatbot, GPT-4o, also relies on Nvidia technology. Meta announced plans in March to buy and build computers containing 350,000 Nvidia GPUs at a cost of billions of dollars, with CEO Mark Zuckerberg even exchanging jackets with Huang. strike a pose Pictured with Nvidia CEO.
“If you look at the construction of artificial intelligence today, who are the real drivers?” Niles said. “This is the most profitable company on the planet — Microsoft, Google, Meta, they’re driving this.”
Nvidia Corporation co-founder and CEO Jensen Huang arrives for an event in Taipei, Taiwan, Thursday, January 25, 2024.
Lin Yifei | Bloomberg | Getty Images
Before the recent artificial intelligence boom, Nvidia was known as a major manufacturer of 3D gaming chips. Nearly a year ago, the chipmaker gave investors the first clue that it was heading for a historic period of growth, signaling to Wall Street that its July 2023 quarter sales would be higher than those expected. The forecast was about 50% higher.
Growth rates accelerated thereafter. But starting in the second quarter, expansion is expected to slow, and analysts expect sharp slowdowns in the next three periods.
“We just don’t know how long this investment cycle will last and how much excess capacity will be generated during that time, in case AI development doesn’t progress as quickly as it did,” analysts at Bernstein wrote in a note earlier this month. As fast as expected.
That’s not to say that Nvidia is at risk of losing a lot of its AI chip business to competitors. Piper Sandler analysts predict that even if companies such as Google build their own customized chips, it will still maintain at least 75% of the artificial intelligence accelerator market share.
“We believe the proportion of hyperscale enterprise spending dedicated to computing will rise further in 2024 and 2025,” Piper Sandler analyst Harsh Kumar wrote in a note.
One question facing the company is how the transition is progressing with its next-generation artificial intelligence chip, Blackwell, which is expected to ship later this year. Some are concerned that the market may be experiencing a lull as customers hold off on purchasing older Hopper GPUs like the H100 in favor of Blackwell-based chips like the GH200.
“To some extent, the landscape has changed,” Morgan Stanley analyst Joseph Moore wrote in a note on Monday. “Six months ago, short-term expectations were very strong, but there was concern about durability. Anxiety. Now, as hyperscalers talk about long-term spending expectations for artificial intelligence, those long-term views are more positive, but there’s anxiety about the pause ahead of Blackwell.
About The Author
