Santa Clara The biggest beneficiary of the race for artificial intelligence (AI) is currently not Microsoft or Google, but the chip company Nvidia. When the latest quarterly figures were presented on Wednesday, Nvidia boss Jensen Huang couldn’t stop raving. The business is developing excellently. “We are increasing our production significantly to meet rising demand,” Huang said.
Measured in numbers, Huang expects sales of around eleven billion dollars for the current quarter. That’s around 50 percent more than analysts had previously expected.
Nvidia’s stock rose more than 29 percent in premarket trading on Thursday. This also had an impact on the papers of chip companies worldwide. The contract manufacturer TSMC from Taiwan gained more than seven percent, the Dutch plant manufacturer ASML almost five percent. US tech stocks were also up premarket.
Since the beginning of the year, Nvidia has recorded an increase in value of more than 113 percent on the stock exchange. The company is currently valued at around $755 billion. If the price jump continues in regular trading on Thursday, Nvidia would be within reach of one trillion dollars for the first time – only Apple, Microsoft, Alphabet and Amazon are currently more valuable.
According to Huang, the main reason for this development is the rapidly increasing demand for solutions based on artificial intelligence. In particular, the text robot ChatGPT has shown the industry what so-called generative AI can do, said Huang. “Generative AI models can create amazing content,” Huang says. Soon, these applications would take up most of the computing power on server facilities around the world.
Thanks to the AI boom, the chip manufacturer is on course to a trillion dollar market value.
(Photo: Reuters)
This primarily requires specialized computer chips. Nvidia offers exactly this. Huang started the company to develop semiconductors optimized for graphics applications. These have turned out to be particularly powerful in AI applications and are often superior to more general chips from manufacturers such as Intel or AMD in tests.
Nvidia’s data center business is booming
After a boom during the corona pandemic, the demand for computer chips had temporarily decreased. Nvidia also felt this trend. However, it was significantly weaker than initially expected by analysts. In the past quarter, sales fell 13 percent to $ 7.19 billion. However, the business with chips for data centers reached an all-time high – this is exactly where the demand for AI chips is greatest.
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Nvidia’s Data Center Group reported revenue of $4.28 billion versus expectations of $3.9 billion, a 14 percent annual increase. Nvidia said that this performance was driven by demand for its GPU chips from cloud providers as well as big Internet companies.
On the other hand, the traditional business with graphics chips for computers is weakening. Nvidia’s gaming division, which includes the company’s graphics cards for PC sales, reported a 38 percent drop in sales to $2.24 billion versus expectations of $1.98 billion.
In addition to the focus on AI applications, Nvidia is also positioning itself as a close partner to the automotive industry. Huang has formed a close partnership with Mercedes. Nvidia’s automotive division, which includes chips and software for developing self-driving cars, grew 114 percent year over year but remained small with quarterly revenue below $300 million.
US sanctions against China endanger Nvidia
However, Nvidia is increasingly becoming the focus of the conflict between China and the USA. Washington sees AI as a strategic industry and has imposed export restrictions on companies exporting to the People’s Republic. For example, Nvidia was forced not to sell its most powerful chips to customers in China. Important customers such as the Chinese technology groups Tencent and Alibaba are currently only receiving versions of Nvidia’s top chips with reduced performance. This applies, for example, to the chip series A100 and H100.
Even stricter sanctions against China are currently being discussed in Washington. “If the Chinese market is taken away from us, we have no way of protecting ourselves. There is no other China, there is only one China,” Huang warned the British newspaper Financial Times. He said it would do “tremendous damage to American companies” if they could no longer trade with Beijing.
Huang pointed out that China accounts for about a third of the US tech industry’s market – the country is irreplaceable both as a source of components and as an end market for its products.
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First publication: 05/24/2023, 11:20 p.m.