Who’s the winner of the AI gold rush? It’s not OpenAI, the startup that unleashed ChatGPT late last year and spurred companies spanning industries from technology to design to consulting to claim that they’re incorporating generative AI into their services.
Quartz Smart Investing Episode 2
It’s Nvidia, a Silicon Valley-based semiconductor company on track to join the $1 trillion club, which has only five members at the moment: Apple, Saudi Aramco, Microsoft, Alphabet, and Amazon.
By the end of the day (May 25), Nvidia’s shares soared 24% to $379.80, while the S&P 500 is up a mere 1%. Nvidia’s stock had its largest one-day percent increase since 2016. So far this year, the semiconductor’s stock is up 165%. Nvidia’s current market valuation is $939 billion.
Why is Nvidia’s stock surging?
The demand for Nvidia’s chips comes as the leading tech companies of the world are racing to apply generative AI into their services. Microsoft uses tens of thousands of Nivdia’s chips, called A100, to power ChatGPT. A single chip reportedly costs $10,000.
In addition to Microsoft, Nvidia counts Google and Meta—who are leading the AI boom—as customers. “[W]e have also procured a substantial amount of supply for the second half,” of the year, Colette Kress, CFO of Nvidia, said on a conference call with investors and analysts on May 24.
It’s a turnaround for Nvidia, where revenue, similar to other semiconductor companies, fell last year due to declining demand for gaming after a pandemic boom and crypto mining.
The company’s solid performance boosted its competitor Advanced Micro Devices’ stock by 11%. Meanwhile, Intel’s stock dropped 5%.
Nvidia Corporation, a computer technology company, is on track to reach a $1 trillion market valuation. According to reports, NVIDIA’s share price has risen more than 130% this year, pushing its market capitalization to nearly $300 billion.
Nvidia is known primarily for its graphic processing units (GPUs), which are typically used to build displays and gaming consoles. The company has become increasingly popular among buyers of high-end, high-performance graphics cards, with demand from the gaming, cryptocurrency mining, and professional visualization industries driving NVIDIA’s share price higher.
Now, following a month of unprecedented growth, investors have begun to wildly speculate on the possibility of NVIDIA reaching the $1 trillion valuation mark soon.
Analysts predict that NVIDIA will be able to maintain its momentum in the short term as its stock gains traction from investors. While some market watchers point to the possibility of the stock’s price further inflating, most believe that the company’s strong fundamentals will keep the stock’s value from becoming overblown.
Analysts are confident that Nvidia will continue to grow, driven by its dominant position in GPU technology, which has been further bolstered by expansion into artificial intelligence software. The company is introducing innovative products that could open up new markets in the future, such as its recent unveiling of the “Drive Constellation”, an end-to-end autonomous vehicle simulator.
The long-term trend of Nvidia’s stock is likely to be impacted by external factors, such as the global economy, pandemic-related restrictions, and competition.
Ultimately, whether or not NVIDIA can reach the coveted trillion-dollar mark remains to be seen. However, investors are certainly optimistic about the company’s potential and are betting that the stock will continue to soar as the company leverages its current technologies and introduces new products in the future.