Nvidia, an artificial intelligence and chip company headquartered in California’s stock market cap, is closing in on $1 trillion, though temporarily with its rising valuation fueled by tech companies big and small racing to add generative artificial intelligence tools to their products, making it the first chip company to do so.
With a $1 trillion value, Nvidia joins the ranks of other tech companies like Apple, Amazon, Google’s parent company Alphabet, Microsoft and Saudi Aramco.
The company creates graphics processing units (GPU), and its estimated Nvidia owns 95% of that market. The $1 trillion market cap in recent days has been powered by enormous growth potential powered by artificial intelligence. Nvidia reached this $1 trillion market valuation thanks to the AI boom.
What is Nvidia?
Even as the market for crypto and gaming PC GPUs has cooled, the AI gold rush sees Nvidia selling shovels at just the right time. AI tools made up the vast bulk of recent Google I/O and Microsoft Build presentations, and Nvidia’s chips make it a key supplier for companies trying to build something with AI.
Why the rise in market valuation?
The company’s stock rose 4.4% on Tuesday morning and about 25% over the past week. The reason being the demand for Artificial intelligence in programming. The company engineers “the most advanced chips, systems, and software” for AI. Shares are now worth around $408.
Last week, the company forecast their second quarter revenue to be more than 50% above Wall Street estimates, leading analysts to increase their price targets, according to Reuters.
The last quarterly earnings report from Nvidia noted over $2 billion in profit in 3 months. This latest push comes after Nvidia’s business boomed during Covid pandemic during a GPU shortage while they were in demand for PC gaming and cryptocurrency mining.
Last fall, CEO Jensen Huang said it had built too many gaming GPUs and was forced to sell them for less money. However, during its next report in February, with ChatGPT all over the news, Huang hyped the potential of Nvidia’s data center growth, and the most recent report showed a new record in data center revenue.
Nvidia’s future projections
Over the weekend, Nvidia’s Computex 2023 keynote was full of AI announcements, including a demo of games using its Avatar Cloud Engine (ACE) for Games to support natural language both for input and responses and a new DGX GH200 supercomputer built around its latest Grace Hopper Superchip that’s collectively capable of an exaflop of AI performance.
Reuters reported Nvidia’s shares jumped around 25 percent last week, and premarket trading Tuesday morning had the stock hitting up to $404.91, a gain of about 4 percent, as reported by Bloomberg.
The company said it is boosting production of the chips, which are used in products like ChatGPT, the AI bot that can complete tasks and answer questions with impressive accuracy.
In an interview with Reuters, Nvidia Chief Executive Officer Jensen Huang said, “the company began producing new AI chips in August and the increasing popularity of AI led to a steep demand increase by January. We had to place additional orders, and we procured substantially more supply for the second half of 2023”.
“Nvidia is the leader in making AI chips, but some experts say that is overvalued”, according to Forbes.
Regulation of Artificial Intelligence
On CBS News’ “Face the Nation” on Sunday, President and Vice Chair of Microsoft, Brad Smith said he expects the U.S. government to regulate artificial intelligence in the year ahead.
Few tech executives, including Elon Musk, have urged for the regulation of AI, which is used in systems like Google’s Bard and even Roombas. During a hearing for the Senate Judiciary’s Subcommittee on Privacy, Technology and the Law, Sam Altman, the CEO of the company behind ChatGPT, said “If this technology goes wrong, it can go quite wrong,” he said. “We want to be vocal about that. We want to work with the government to prevent that happening. But we have to be clear-eyed about it”.
