A small green label of Nvadia on your computer or laptop probably indicates that Nvidia’s hardware or a graphics card to be precise is inside. The presence of an Nvidia processor in your PC is likely responsible for the smooth operation of Fortnite at frame rates of 30 or 50.
Mark Pesce, an honorary associate in digital cultures at the University of Sydney, explains, “Nvidia started by making the chips that go into your PC that allow you to play games fast.”
Nvidia first welcomed customers in 1993. Applications built by Tesla, Google, Amazon, Facebook, and Microsoft that utilize artificial intelligence (AI) are made feasible by its powerful hardware, which has led to its current phenomenal demand.
They are the best chip makers for gamers and they have been for a long time. But after a few years, they realized that the same chips could very well be used for artificial Intelligence too. Since then, there has been no going back.
The technology behemoth disclosed its December quarter 2023 revenue of US$22.1 billion ($33.6 billion) on Thursday, representing a 265% increase compared to the same period last year. In response to the announcement, investors flocked to the shares, driving up its market value by $381 billion (or $US250 billion). It’s the largest single-day increase ever recorded by a Wall Street corporation.
“The world has reached a tipping point of new computing power,” said Colette Kress, chief financial officer of Nvidia, during the presentation of the results. On Wall Street, Nvidia shares ended the day up 16.4%, at $US785.38.
After the spike, Nvadia’s market valuation has surged to $US1.94 trillion ($2.95 trillion), which is almost $38 billion more than Australia’s gross domestic product.
Dr. Pesce claims that Nvidia not only slashed their profit, but they slashed it by 700 percent. Many experts had predicted that Nvidia would not even be able to meet its expected profitability for the term. He informed that they are producing chips at breakneck speed because of high demand and little supply; in other words, they are essentially manufacturing money on silicon.
Rise Of AI Is Hyping The Industry:
Demand for Nvidia processors has skyrocketed for Microsoft-affiliated technologies like ChatGPT, which has been crucial to Nvidia’s recent success. However, will demand remain high in light of competition from other tech companies aiming to produce chips with comparable processing power?
For Dr. Pesce, the answer is yes. Although he acknowledges that Nvidia will not hold a monopoly in the market, he believes that the rapid growth of the industry makes it irrelevant. AI is still in its early stages. People aren’t shelling out cash for no apparent reason.
He claims that the current climate is ideal for investing in AI, mainly because capital is being redirected into infrastructure. According to him “We are in a ‘picks and shovels’ phase — and so as long as that holds out, investor returns will be good,”. However, the true nature of the fortunes will become apparent when we get into the practical uses of AI and consider how it will impact our daily work lives.
Evan Lucas, an independent analyst, has dismissed claims of a stock market “bubble” and is “excited” over Nvidia’s earnings hopes. Nvidia has no stress indicators that would indicate the presence of a bubble. in his opinion.
Nvidia has a thirty-year history, therefore this is hardly a startup. Thus, it is well-versed in its actions and has a past. Additionally, they have the proper individuals on board and a wealth of knowledge. The firm has reached maturity and is now expanding.
However, Mr. Lucas is not entirely optimistic about the future of the business. He said, “My concern would be that [if you had] a supply interruption [like the one] that COVID created, that you’d have an interruption where maybe the chip technology started to fail,” he further added that Nvidia would face a fundamental challenge if its chip technology failed to handle the processing demands of artificial intelligence.
No one should call the recent surge in artificial intelligence a “bubble”; economists share this concern. The current AI boom is being compared to the tech bubble from the nineties, but there are significant contrasts, as pointed out by AMP’s senior economist Shane Oliver, in that tech businesses associated with AI are seeing vigorous profit growth.
However, investors should exercise caution before hopping on the AI wagon due to the intense competition in the chip-making industry and the length of time required for the economic advantages of AI to materialize.
As happened with other IT stocks a generation ago, the true beneficiaries could not be the same as the current elite. Since Nvidia’s manufacturing facilities are located in Taiwan, Dr. Pesce notes that the company is also vulnerable to geopolitical threats.
