Nvidia Approaches Trillion-Dollar Mark on AI Use

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Facts

  • After surpassing Wall Street estimates for the first quarter of 2023, Chipmaker giant Nvidia’s stock rose around 26% on Thursday, increasing its value from around $196B to almost $1T at approximately $951B.1
  • The company recorded a revenue of $7.19B for Q1 as well as earnings per share of $1.09, in comparison to estimates of approximately $6.5B and $0.92, respectively.2
  • Nvidia also greatly exceeded Wall Street forecasts for sales in the second quarter by 50%, predicting a total of $11B.3
  • Nvidia CEO Jensen Huang stated that the microchip sector was experiencing “two simultaneous transitions” in accelerated computing and artificial intelligence (AI), driving Nvidia's impressive results. Huang also stated that the company would increase related production to match the “surging demand."4
  • A recent report by CB Insights revealed that Nvidia holds approximately 95% of the market for AI graphic processing units (GPU), with its AI chips selling for approximately $10K each. Approximately 10K Nvidia GPUs were used within a Microsoft supercomputer in order to create ChatGPT.5
  • While the news also caused stock rises for companies such as Monolithic Power Systems, Taiwan Semiconductors, and Advanced Micro Devices, industry rival Intel saw a 5% drop in its stock price.6

Sources: 1Al Jazeera, 2CNBC, 3FT, 4Investopedia, 5BBC News, and 6MarketWatch.

Narratives

  • Narrative A, as provided by TipRanks Financial. The current euphoria surrounding Nvidia won’t last forever. While riding high on the AI hype and beating market expectations, Nvidia’s revenue still decreased from 2022’s Q1. Furthermore, Nvidia’s gaming division also saw disappointing results. With these factors being considered, the now highly anticipated Q2 results this year may not be as rosy as many have forecast.
  • Narrative B, as provided by Yahoo Finance. Nvidia’s soaring stock price isn't a bubble that’s going to burst. Its CEO has a track record of executing his vision strongly, and the company is leading the chip market and continuing to pour money into its expanding AI services. While, like many seismic stock increases, we may see a slight dip in the near future, Nvidia is on course to continue its success.

Predictions