Semiconductor giant Nvidia makes the chips that power the artificial-intelligence revolution, so the stock is soaring. Matthew Partridge reports
Shares
It took chip giant Nvidia 24 years “to reach the rarefied air” of $1trn in market value, says Asa Fitch in The Wall Street Journal. But its role in “powering the AI [artificial intelligence] revolution” meant that reaching a second trillion only took eight months. The reason its shares have reached such “lofty heights” is the latest earnings report, which revealed quarterly sales of $22.1bn and forecast another $24bn for its current quarter. Each figure represents an increase of more than 200% from the year before, beating Wall Street’s bullish expectations. As a result, Nvidia’s shares have gained 59% in 2024 after more than tripling in 2023.
Nvidia is doing so well because it “is at the heart of the AI gold rush”, with those developing the technology “relying heavily on its wares”, says Callum Jones in The Guardian. Microsoft, OpenAI, Amazon, Meta and Google “have all struck deals to buy the firm’s chips in bulk as they scramble to release new AI products and features”. This “remarkable acceleration” in demand has, in turn, “turbocharged Nvidia’s business”, especially in terms of revenue from data centres. Expectations about its growth trajectory have also “been stoked by Nvidia’s plans to ship a new chip, the B100, at the highest end of its product line, later this year”.
Tread carefully
Nvidia’s results may have “exhausted the superlatives”, but the risks for investors “continue to loom large”, says Richard Waters in the Financial Times. Chip companies “are prone to deeply cyclical swings in demand as investment booms rise and fall”, which leaves them vulnerable to “severe setbacks”. This is particularly the case given that Nvidia has become a prisoner of the “overwrought stockmarket expectations its success has fuelled”. Will the AI boom “turn out to be as large and durable as the tech and financial worlds have come to believe”? And can Nvidia “withstand the onslaught of competition that has been unleashed against it”? Rivals will certainly be “gunning for it” and AI’s “promise could fall short”, but while “there’s no shortage of mania” when it comes to AI, Nvidia “looks like the real deal”, says Robert Cyran on Breakingviews. It not only “spends a chunky 11% of sales on R&D
