Maybe the chip company Nvidia was just living up to its name when it presented its figures on Wednesday evening shortly after 10 p.m. German time. After all, the company name is derived from the Spanish Envidia, which means nothing less than “envy”. The win? Increased sevenfold in just one year. Sales? Better than expected at $26.04 billion in the first quarter. The stock? It even jumped well above the round $1,000 mark in early US trading on Thursday. Competitors and investors could be jealous.
Anyone who listened to Nvidia CEO Jensen Huang that evening was initially able to hear his version of the story. “The next industrial revolution has begun,” said Huang, setting the tone. The company has been benefiting from high demand for several years: first the computer parks for the Bitcoin network needed fast chips, then came the computer boom during the Corona crisis. However, since the chatbot ChatGPT with artificial intelligence was launched in November 2022, demand has become “stratospheric,” as they say on the stock exchange.
Anyone who wants to feed and train the AI models with huge mountains of data cannot ignore Nvidia’s high-performance chip H100. The company has now secured an 80 percent market share in the data center business, according to experts at Deutsche Bank. Data center operators are now expected to pay several tens of thousands of dollars for this scarce commodity, and sometimes they have to be delivered in armored vehicles. Not all large data centers have yet been converted or upgraded for training and operation of artificial intelligence. And Nvidia plans to deliver its new super chip under the code name “Blackwell” as early as autumn. Of course, it will be even faster and, above all, even more expensive. “If you are almost alone in a market, you can simply charge exorbitant prices,” says tech expert Daniel Kröger from the Ehrke & Lübberstedt investment company.
Meanwhile, however, there are also more and more doubters who do not see Nvidia’s legendary rise as a sure thing. According to estimates, the four companies Amazon, Meta, Microsoft and Alphabet alone account for 40 percent of Nvidia’s sales of high-performance chips. The fact that these tech giants are now working on their own chips is unlikely to have escaped Nvidia’s notice. This would not only enable the companies to break free from the clutches of Nvidia’s dominance, but also tailor the chips to their highly specialized needs.
Competitors like Intel are not sleeping either, the company recently introduced its own top chip “Gaudi3”. Technologically, it may still lag behind the latest developments from Nvidia, but with tougher competition, the company will no longer be able to simply charge any price for its products. “The competition will be massive,” says tech expert Daniel Kröger.
In this respect, Huang had to justify himself several times in a telephone conference with analysts under the eyes of the stock market world. In the future, his company wants to not only sell individual chips more, but also interconnect them to form so-called supercomputers. And if that wasn’t enough, Nvidia boss Huang also announced more business with car companies or healthcare companies, which would also have to rely more heavily on artificial intelligence in the future. On top of that, a partnership with Dell is intended to bring special computers for artificial intelligence to medium-sized companies that do not directly need an entire data center.
Huang was able to convince people on the stock market with his numbers and words. In an initial reaction, Nvidia’s share price rose by more than four percent in the evening. Because Nvidia wants to split every share into ten parts like a cake in just a few weeks with a share split and thus make it visually cheaper, even more investors could access the stock market in the future.
Perhaps the alleged reduction in the share price is also intended to conceal the excessive influence that the share has now gained on the broad stock market indices. Only recently, stock market strategist Scott Rubner from the investment bank Goldman Sachs described the stock as the “most important share on the globe”. This week, experts from Deutsche Bank seconded this, saying that the financial markets as a whole are currently hanging on just one single share. This time, things have gone well for the stock markets.