Perhaps the chip company Nvidia simply lived 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 word Envidia, which means nothing less than “envy.” Profits? Increased sevenfold in just one year. Sales? Better than expected, at $26.04 billion in the first quarter. The share price even jumped well above the round $1,000 mark in early US trading on Thursday. Competitors and investors were right to be jealous.
Anyone who listened to Nvidia CEO Jensen Huang that evening was able to hear his version of the story first. “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.
If you want to feed and train the AI models with huge mountains of data, you can’t ignore Nvidia’s high-performance chip H100. Deutsche Bank experts have determined that the company has now secured an 80 percent market share in the data center business. Data center operators are now expected to pay tens of thousands of dollars for these scarce goods, and sometimes they have to be delivered in armored cars. Not all large data centers have yet been converted or upgraded for the training and operation of artificial intelligence. And Nvidia wants to deliver its new super chip under the code name “Blackwell” in the fall. Of course even faster and above all: even more expensive. “If you are almost alone in a market, you can simply call up exorbitant prices,” says tech expert Daniel Kröger from the fund company Ehrke & Lübberstedt.
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 don’t sleep either; the company recently introduced its own top chip “Gaudi3”. Technologically, it may still lag behind Nvidia’s latest developments, but with stiffer competition, the company would no longer be able to easily charge any price for its products in the future. “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 the stock market with his figures and words. In an initial reaction, Nvidia’s share price rose by more than four percent that evening. Because Nvidia plans to split each share into ten pieces like a cake in just a few weeks with a stock split, making it look cheaper, even more investors could take advantage of the stock market in the future.
Perhaps the alleged price reduction is also intended to conceal a little of the excessive influence that the share has now gained on the broad stock market indices. Just recently, stock market strategist Scott Rubner from the investment bank Goldman Sachs described the stock as the “most important stock in the world”. This week, the experts at Deutsche Bank finally confirmed that the financial markets as a whole are currently attached to just one stock. This time things went well for the stock markets.