Nvidia is proving there are very real dollars — billions of them — to be made in artificial intelligence.
Sales of Nvidia computer chips used to power AI-based systems have exploded, especially since ChatGPT was released to the public in November.
Everyone from giant Amazon to the smallest AI startups is fighting over the tight supply of the Silicon Valley company’s GPUs — graphics processing units — which, at least for now, are the only game in town.
On Thursday, Nvidia’s stock flirted with a record high after the company reported quarterly results that blew past Wall Street estimates. The stock, up more than 220 percent this year, is far and away the biggest gainer in the tech-focused Nasdaq 100 and the more diversified Standard & Poor’s 500.
“Nvidia is probably going to be the most important company to civilization over, we think, the next five to 10 years,” CFRA Research analyst Angelo Zino told Yahoo Finance.
OK, Zino may have gotten a little carried away. But Nvidia is the bona fide first big moneymaker of the AI era.
Nvidia’s profit tripled to $6.2 billion in its fiscal second quarter. Revenue more than doubled to $13.5 billion.
Its stock market value has more than doubled this year to $1.2 trillion — just one of six US companies, and the first semiconductor maker, trading above the trillion-dollar mark.
Cofounder and chief executive Jensen Huang’s 3.5 percent stake in the company is worth $42 billion, ranking him as the 18th wealthiest person in the country, according to Bloomberg.
On Thursday, Morningstar’s Brian Colello, the only Wall Street analyst with a sell rating on Nvidia’s stock, threw in the towel, saying the company’s GPU sales could reach $60 billion next year and $100 billion in 2028.
“Such growth might be unprecedented in large-cap tech,” he wrote, “but we foresee all types of enterprises investing in AI.”
Nvidia is far from an overnight sensation.
The company got its start in 1993 as a maker of 3-D video- and image-creating chips that are ubiquitous in video game systems. But GPUs are also good at the kind of high-intensity computing needed to train AI models like ChatGPT. And Nvidia’s Cuda programming language, released in 2006, was a launchpad for selling to data center customers seeking more powerful tools.
Long-term investors in the company have been rewarded for their loyalty. Annual returns averaged 48 percent in the decade prior to this year’s sharp runup. The Nasdaq 100 returned just under 17 percent over the same period.
Fidelity Investments of Boston was an early and big investor in Nvidia, and its funds hold more than 5 percent of the outstanding shares.
When a company gets as big as Nvidia, supersonic growth gets increasingly harder to maintain.
The company outsources manufacturing of its chips, leaving it vulnerable to supply constraints. The US government has imposed restrictions on which products it can sell to China for national security reasons.
And other companies, including AMD, Intel, and cloud computing companies, are working on their own AI chips.
Through a combination of skill and luck, Nvidia found itself in the right place and the right time. AI, unlike the metaverse, is no fad. Serious investors are betting it has the potential to transform the world much like the internet did.But it’s too soon to know whether Nvidia will be the Apple of this tech revolution — or perhaps the Blackberry.