As fortunes surge amid AI push, where is NVIDIA headed?
What's the story
NVIDIA reported a 265% surge in revenues to $22 billion in the three months to January 28 compared to the same period last year. The surge in NVIDIA's fortunes is due to its dominance in manufacturing semiconductor chips that are in great demand due to the global push toward artificial intelligence (AI). NVIDIA CEO Jensen Huang has remarked that AI is at a 'tipping point.' Its H100 GPUs chips are causing a buying frenzy among giants like Microsoft and Meta.
Stock performance
Stock price surge and market value fluctuations
The past year has seen NVIDIA's stock price skyrocket by 200%, even surpassing Amazon and Alphabet in market value earlier this month. However, recent fluctuations have caused the stock price to drop to $662, resulting in a $78 billion loss in market value. Despite the setback, NVIDIA's stock price remains 40% higher than it was in January and 200% higher than a year ago.
NVIDIA's competitors
Growing competition and in-house AI chip development
But NVIDIA's success might be challenged by big tech companies like Microsoft, Google, Amazon, and Meta, who are developing their own AI chips. Microsoft has even teamed up with Intel, NVIDIA's rival, for custom chip development. Competitors like AMD and Intel are working on potentially cheaper alternatives to NVIDIA's H100 GPUs, such as AMD's December announcement and Intel's Gaudi3.
Caution advised
Analysts' warnings and AI bubble concerns
Some analysts are sounding the alarm for NVIDIA, comparing the AI bubble to the dot-com bubble and warning that it could burst. D.A. Davidson analysts caution that Microsoft's move to develop its own GPUs and buy from NVIDIA's competitors is a red flag. Experts from Research Affiliates mention that NVIDIA is overvalued and its value is based on the premise that the new entrants in semiconductor market will not displace its dominance. This paves room for speculation against NVIDIA.
Business operations
Finances exceed analysts' estimates
NVIDIA forecast a 233% rise in its quarterly revenues for the current quarter, exceeding analysts' estimates. As per the chipmaker, its gross profit surged by a whopping 338% to $16.8 billion in the final three months of its financial year. The company's annual gross profit also skyrocketed by 188% to over $44 billion.