Nvidia CEO Jensen Huang speaks at the Supermicro keynote at the Computex conference on June 1, 2023 in Taipei.
Walid Belazeg | Sopa Images | Lightrocket | Getty Images
After last year’s crash in the tech stock market, 2023 saw a rebound across the board from the industry’s biggest players. But one company far surpassed them all. Nvidia.
Driven by more than a decade of head start on the kind of artificial intelligence chips and software now coveted throughout Silicon Valley, NVIDIA stock is up 180% this year, outperforming all other S&P 500 companies. outnumbered members.Facebook’s parents are the next biggest gainers in the index metaup 151% at Friday’s close.
Nvidia is now valued at over $1 trillion, making it the fifth most valuable US company after tech giants. Amazon, apple, microsoftand alphabet.
Nvidia may not be as household a name as the tech behemoths, but its core technology is one of the most high-profile companies threatening to rapidly disrupt everything from education and media to finance and customer service. It is the backbone of new products. It’s ChatGPT.
OpenAI’s viral chatbot. We are receiving a lot of funding. microsoft, along with the AI models of a handful of well-funded startups, they all rely on Nvidia’s graphics processing units (GPUs) to run. These are widely regarded as the best chips for training AI models, and Nvidia’s financial projections suggest insatiable demand.
The company’s powerful H100 chip is priced at around $40,000. They are being swept by Microsoft and OpenAI by the thousands.
“Simply put, they have the best GPUs of the best,” said Piper Sandler analyst Harsh Kumar, who recommends buying the company’s stock. “And they have it today.”
Even with all this momentum and seemingly insatiable demand, NVIDIA’s stock price incorporates various growth assumptions, such as doubling revenue in the next few quarters and nearly quadrupling net income this year. I’m here.
Some investors describe the stock price as: Pricing for perfection. Looking at corporate earnings over the last 12 months, Nvidia has a P/E ratio of 220, making it surprisingly rich even when compared to highly rated and well-known tech companies. Amazon’s PER is 110 times, Tesla’s According to FactSet, he is 70 years old.
If Nvidia lives up to analysts’ predictions, current pricing still looks high compared to most of the tech industry, but certainly more reasonable. The company trades for 42 times earnings over the next 12 months, compared with Amazon’s 51 times and Tesla’s 58 times, according to FactSet data.
When Nvidia reports earnings later this month, analysts expect it to post $11.08 billion in quarterly revenue, up 65% from a year earlier, according to Refinitiv. This is slightly higher than NVIDIA’s official guidance of around $11 billion.
Investors are betting that beyond this quarter into next quarter, Nvidia will not only be able to ride the AI wave for quite some time, but will also be able to outperform Google and its growing competition. AMDavoiding major supply problems.
There is also risk if the stock price rises too quickly. Nvidia’s stock fell 8.6% this week compared to the Nasdaq’s 1.9% drop, but there was no bad news to cause such a drop. It was the biggest weekly drop for Nvidia stock since September last year.
WisdomTree analyst Christopher Ganatti said, “As an investor, my excitement for all the great things NVIDIA has done and will do is already built into this performance. We have to start thinking about whether or not.” wrote in the post on thursday. “High investor expectations are one of the most difficult hurdles companies have to overcome.”
How Nvidia Got Here
Nvidia’s stock price rally this year is impressive, but the really eye-opening chart is the 10-year trend. A decade ago, Nvidia was valued at roughly $8.4 billion, making it a mere fraction of the semiconductor giants. Intel’s market cap.
Since then, Intel’s stock has risen 55%, while NVIDIA’s value has ballooned by more than 11,170%, seven times more than its rivals. Tesla, which has made CEO Elon Musk the richest man in the world in a recent stock rally, is up 2,279 percent.
Nvidia founder and CEO Jensen Huang’s net worth ballooned to $38 billion, ranking him 33rd in the world rankings. Bloomberg Billionaires Index.
An Nvidia spokesperson declined to comment on the matter.
Before the rise of AI, Nvidia was known for producing key technology for video games. company, reportedly Born in Denny’s, San Jose, California in 1993, the company developed processors that enabled gamers to render sophisticated graphics in computer games. Its iconic product was the graphics card, a chip and board that plugs into consumer PC motherboards and laptops.
Video games are still big business for the company. Nvidia has reported that game sales exceeded $9 billion for fiscal year 2023. However, this decreased by 27% on an annual basis. This is partly because Nvidia sold so many graphics cards early in the pandemic when people were upgrading their systems at home. Nvidia’s core gaming business continues to shrink.
What excites Wall Street has nothing to do with gaming. Rather, it’s an emerging AI business that belongs to Nvidia’s data center division. The division’s revenue grew 41% to $15 billion last year, surpassing games. Analysts polled by FactSet expect it to more than double to $31.27 billion in fiscal 2024. NVIDIA controls over 80% of the AI chip market, according to analysts.
Nvidia’s pivot to AI chips has actually taken 15 years.
In 2007, the company released a little-known software package and programming language called CUDA. This allows the programmer to take full advantage of the hardware capabilities of his GPU chip.
Developers quickly found the software effective for training and running AI models, and CUDA is now an integral part of the training process.
Analysts say AI companies and programmers using CUDA and Nvidia GPUs to build models are unlikely to switch to competitors such as AMD chips or Google’s Tensor Processing Unit (TPU). .
“NVIDIA currently has a double moat of having the best performing training hardware,” said Patrick Moorhead, a semiconductor analyst at Moor Insights. “And on the input side of the software in AI is the library and his CUDA.”
Secure revenue and supply
As Nvidia’s reputation has grown, the company has taken steps to secure leads and meet their high expectations. Huang had dinner with Chairman Morris Chan in June. Taiwan Semiconductor Circuit Manufacturing Co., Ltd.
TSMC, the world’s leading manufacturer of chips for semiconductor companies, manufactures key products for Nvidia. After eating, Mr. Huang said that he felt like this.completely safeIt relied on foundries, suggesting that NVIDIA had secured the necessary supplies.
Nvidia has also become a leading startup investor in the venture world, with a clear focus on backing companies working with AI models.
According to Pitchbook data, Nvidia will invest in at least a dozen startups by 2023, including some of the most high-profile AI companies.They include Runwaycreate an AI-powered video editor. Inflectional AIfounded by the former DeepMind founders, and by CoreWeave, a cloud provider that sells access to Nvidia GPUs.
The investment will give the company access to a growing pipeline of customers, which in the future could not only boost Nvidia’s sales, but also offer the company’s GPUs to a wider variety of customers. There is
Some of the startups have put out numbers that show the demand for NVIDIA’s technology is very high. Piper’s Kumar quoted his CoreWeave management commenting, show The company had revenue of $30 million last year and has a $2 billion business deal next year, he said.
“This represents a demand for generative AI type applications, or voice search applications, or GPU applications in general,” said Kumar.
Nvidia is now approaching the midpoint of its current GPU architecture cycle. The latest high-end AI chip, the H100, is based on Nvidia’s Hopper architecture. Hopper was announced in March 2022, and Nvidia said it expects its successor to arrive in 2024.
Cloud providers such as Google, Microsoft and Amazon say they will spend a lot of money on expanding data centers that rely primarily on Nvidia GPUs.
For now, Nvidia sells just about every H100 it can make, but industry insiders often complain about how hard it is to secure GPU access after announcing ChatGPT late last year. .
“ChatGPT was the AI moment on the iPhone,” Huang said at the company’s annual shareholder meeting in June. “It’s all wrapped up in a simple user interface that anyone can understand. But we’re only getting the first glimpse of what’s possible. will have a similar impact.”
Investors are buying the story. But as this week’s volatile trading showed, they can also quickly hit the sell button when a company or market hits a dead end.
— CNBC’s Jonathan Vanian contributed coverage.
clock: CoreWeave Raises $2.3 Billion With Debt Backed By Nvidia Chips
