Nvidia Proves It's AI Heaven

This year, two companies are in the limelight on Wall Street because their comebacks have almost been tantamount to resurrections. 

Meta Platforms, the social networking giant, and Nvidia make a great couple. They, like many tech companies, had a nightmarish 2022 at the end of the coronavirus pandemic economic cycle. The economic slowdown precipitated by stubborn inflation and interest rate hikes by the Federal Reserve to combat rising prices has chilled consumers. Unsurprisingly, so-called growth companies such as tech groups were the first to be affected. 

Shares of Meta Platforms  (META) - Get Free Report, the parent company of Facebook, WhatsApp and Instagram, fell 64.2% last year, ejecting the company from the world's top 10 largest companies by market capitalization. This year, the stock of Mark Zuckerberg's group has more than recovered all of its losses from the previous year: its share price has soared 105.3% since January.

There are very few companies able to compete with such a dramatic turnaround. In fact, only Nvidia can challenge Meta for the title of comeback kid among the big tech groups. By 2022, the chipmaker's stock had fallen 50.3%, equivalent to about $365 billion in market value wiped out. But this year, Nvidia, leader in the graphics card market and innovations related to real-time 3D, is a real tornado on the stock market. The company's shares are up around 109%, based on the price at the close of the May 24 trading session. This rebound equates to about $394 billion more in market capitalization. Nvidia had a market value of $755.2 billion as of May 24, making it the sixth-largest company in the world according to companiesmarketcap.com.

Nvidia Close to $1 Trillion Market Cap

These figures, which are the envy of many companies, were already old news only minutes after the closing of the stock market. Indeed, Nvidia has published thunderous first quarter earnings and shared insane forecasts for the second quarter that fueled its stock in after-hours trading. Nvidia shares, which closed at $305.38, soared nearly 29% to $393.49. This spectacular surge put Nvidia close to the symbolic threshold of $1 trillion in market value ($972 billion).

Nvidia  (NVDA) - Get Free Report said, in a statement, it expects revenue of around $11 billion, plus or minus 2%, for the second quarter of its fiscal year. This figure is about $4 billion higher than analysts' expectations of $7.15 billion.

"The computer industry is going through two simultaneous transitions — accelerated computing and generative AI,” said Jensen Huang, founder and CEO of Nvidia. "A trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process."

He added that Nvidia is ready to meet the demand.

"Our entire data center family of products — H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand and BlueField-3 DPU — is in production. We are significantly increasing our supply to meet surging demand for them."

The group has achieved dominance in the video game market with its graphics cards (GPU), true Formula 1 of computing and Holy Grail of the player on PC. From now on, Nvidia also reigns over the artificial intelligence sector, establishing itself as one of the masters of the game in this field. Its GPUs are used to train and develop neural networks, in machine learning, deep learning programs.

"Nvidia's bullish long-term forecast of $11 billion for the next quarter is fueled by the growth of generative AI and the increasing acceleration and need for high-performance computing within data centers," said Lucas Keh, analyst at global research firm Third Bridge. "Despite the persistent slowdown and decline in PC market revenue, the company has found a way to offset these losses and target the growing opportunities."

The AI Arms Race

One of Nvidia's weapons to dominate AI is its all-new H100 data center graphics processing unit. The H100 is said to be nine times  faster than its predecessor in AI training and up to 30 times faster in AI inference for large transformer-based language models like chatbots ChatGPT (OpenAI) and Bard (Google).

As a result, in the first quarter of its fiscal year which closed on April 30, Nvidia reported a 19% revenue increase to $7.2 billion, compared to the previous quarter. This strong performance was due to record revenues in the Data Center division, which recorded $4.28 billion in sales, up 14% from a year ago and up 18% from the previous quarter, beating expectations ($3.9 billion.)

This division benefits from the AI ​​Arms race between Big Tech -- Microsoft, Google/ Alphabet, Meta etc -- and startups, as well as the cloud war between Amazon, Microsoft and Google.

The automotive division, which includes chips and software to develop self-driving cars, is also in great shape, especially with the race for automakers to quickly achieve autonomy. Revenues soared 114% on a year-over-year basis, but remains small at under $300 million in sales for the quarter. The only weak spot in the release was revenue from the gaming division -- graphics cards for PC sales -- which reported revenue of $2.24 billion in sales, down 38% from a year ago. But the sales were up 22% from the previous quarter.

In all, Nvidia reported net profit of $2.04 billion, down 21% year over year but up 25% from the prior quarter.