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Tech companies have been able to benefit from the boom in the AI industry in recent weeks. However, there are differences – and one company in particular stands out.
The hype surrounding artificial intelligence is currently causing a boom in demand for many tech companies. The technology-heavy US index Nasdaq 100 was able to post an increase of 7.6 percent in May alone thanks to the AI euphoria, and the index has even recovered by around 30 percent since the beginning of the year. Because US corporations in particular can benefit from the AI boom – above all chip developers.
Why are chip manufacturers benefiting from the AI boom?
AI programs like ChatGPT can generate text, images or videos with just a few keywords. To do this, countless calculations have to be carried out in parallel – the programs therefore need a lot of computing power. Graphics card chips (GPUs) are particularly suitable for this.
And further development is happening at breakneck speed: According to the analysts at the investment bank Goldman Sachs, investments in AI could reach one percent of the annual economic power there by 2030 in the USA alone. Based on the Lowy Institute think tank forecast for US gross domestic product at the time, that would be $287 billion. The computing capacities also have to keep up with this, which fueled the demand for chips in particular. The world’s largest supplier of GPUs is Nvidia.
What makes Nvidia so special?
Nvidia was founded 30 years ago by the US-Taiwanian Jen-Hsun Huang together with Curtis Priem and Chris Malachowsky and is headquartered in Santa Clara, California. According to experts, Nvidia controls 80 percent of the world market for graphics card chips – the US group has an extensive range of products that are only intended to accelerate machine learning.
This caused Nvidia’s market value to break the sound barrier of one trillion dollars last Tuesday. The company was the first chip manufacturer ever to be included in this exclusive club of currently six companies whose market value has reached more than one trillion dollars.
There are a few prominent examples of built-in Nvidia chips: The high-performance computer for ChatGPT is based on several thousand Nvidia processors, and Google used such Nvidia chips to train its translation service Google Translate.
Which companies also benefit from the AI hype?
Nvidia’s competitors are AMD, ASML and Marvell, all of which are also benefiting from the AI boom. ASML has posted year-to-date growth of more than 30 percent. Software companies such as Amazon, Google and Facebook parent Meta are now also working on their own special AI processors. They can also benefit from the AI boom at the moment, but not nearly as much as Nvidia.
“If the AI trend proves sustainable, the immediate demand will be for chips and computing power, and that’s where Nvidia is the flagship at the moment,” Thomas Hayes, chairman of private equity firm Great Hill Capital, said of Nvidia’s strong earnings in the past weeks.
There are also companies in Germany that want to benefit from the AI hype, such as Spinncloud from Dresden. In an interview with the “Handelsblatt”, however, Gartner analyst Alan Priestley said that it was particularly difficult for start-ups to gain a foothold in the industry, since the operators of the data centers often found it difficult to even try out the chips from the small companies. As a result, it is particularly the large, well-known companies that benefit from the AI hype.
How is the software company doing business?
In the development of AI applications, the ChatGPT developer OpenAI, in which Microsoft has a stake, and the Internet group Google are in a race for technological leadership. However, it is currently still completely open which AI application will ultimately prevail. That should also be the reason why their stock market values are also rising, but not as extremely as that of Nvidia at the moment.
In addition, the important software companies in AI development already have a market value of more than one trillion US dollars: the online retailer Amazon, the iPhone provider Apple, the software company Microsoft and the Google mother company Alphabet all have a market cap of more than $1 trillion.