Nvidia: Thanks to artificial intelligence, chips are ready for CEO Jensen Huang

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In an astronomical prediction, Nvidia has gone from a company known for gaming chips to one whose role in artificial intelligence could become the first trillion-dollar semiconductor stocks.

The US chip designer’s recent quarter reality hasn’t been impressive. What is fueling the share price is the current quarter. Revenue is expected to double to a critical unit. This sells graphics processing units used to train large language models needed for generative AI.

That could take company-wide revenue to $11 billion, up more than 60% from last year. The jump in demand doesn’t appear to be a one-off. In its earnings call, Nvidia said it delivered a “substantial” supply for the second half of the year.

It was already clear that Nvidia was a smart way for investors to capture the craze for generative AI. Companies haven’t defined exactly how much money they can make by applying AI to services. But they have to buy products to train him if they want to find out. Feedback from bosses combines bewilderment, fear and amazement at the possibilities.

It must be a bruise to the competition that Nvidia’s market cap increase on Thursday was so large that it was measured in Intel (a $193 billion increase = about 1.7 Intel). Additionally, Intel’s attempt to compete in AI chips was hampered by its failure to launch anything that could match Nvidia’s H100 chips.

The latest jump in its stock price means Nvidia is now trading at 59 times expected earnings, nearly double that of rival Intel. Accepting this requires the belief that experiments in artificial intelligence herald the beginning of what one analyst has termed the fourth industrial revolution.

Chief Executive Jensen Huang warned US-China tensions could seriously damage the US technology sector. Nvidia can’t sell its best-performing chips to China. But domestic demand compensates for this.

Keeping up with this demand is a short-term challenge to keep an eye on. This includes ensuring a regular supply. The US may try to bring chip production home, but Nvidia is relying on Asian makers Samsung and TSMC.

Keep in mind that global competitors are racing to make their chips suitable for AI workloads. But for now, Nvidia isn’t just about selling shovels to gold diggers, it’s the only shovel seller in town.

Lex’s team is interested in hearing more from readers. Please tell us what you think about the outlook for AI chips in the comments section below.