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Nvidia Corporation (NVDA) had a market capitalization of $948 billion as of Friday. That’s just 16 percent shy of the overall cryptocurrency market lead held by Bitcoin, Ethereum, thousands of altcoins, and all stablecoins. Nvidia’s surge is a rare market phenomenon.
NVDA stock started the year at $143.15 a share, up 170% to $386.54. Given this AI momentum, it’s no surprise that NVDA’s market capitalization growth since Wednesday has nearly matched ethereum’s (ETH) market cap at $217 billion, compared to Ethereum’s $220 billion.
Artificial intelligence/computing infrastructure (NVDA) and so-called DeFi infrastructure (ETH). Image source: TradingView
In turn, Nvidia appears to be gaining a foothold among the Big Five of Apple, Microsoft, Alphabet (Google), and Amazon, displacing Meta Platforms (Facebook) for fifth place.
The question is, what happened on Wednesday?
Fusion of Results and Estimates
On Wednesday, Nvidia released its first-quarter 2023 earnings. While revenue of $7.19 billion was down 13% from a year ago, it was up 19% from the previous quarter. That alone beat market expectations of $6.52 billion, according to a Refinitiv poll.
Likewise, Nvidia’s data center chip sales beat the FactSet estimate of $3.89 billion to $4.28 billion. What’s more, Nvidia’s forecasting model sees $11 billion in revenue (+/- 2%) by Q2 2024. That was more than 50% above the Wall Street consensus.
Net income per share rose to 82 cents per share, up 28% from 64 cents per share a year earlier. With these results in hand, Nvidia CEO Jensen Huang is basing his outperforming forecast model on a larger demand surge.
“Our entire line of data center products – H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand and BlueField-3 DPU – are in production. We are increasing supply significantly to meet the surging demand for them ,”
Although Nvidia was founded in 1993 as a video game company supplying GPUs, it now falls more into the data center supply camp. As mentioned earlier, data center chip revenue was $4.28 billion in the first quarter, while gaming revenue was $2.24 billion in the same period.
It can also be seen from the 114% year-over-year growth of the automotive design field (currently revenue of $296 million), that Nvidia is expanding its computing field beyond gaming. For example, BYD Auto, China’s largest new energy vehicle (NEV) manufacturer, has selected Nvidia for its DRIVE Orin computing platform for next-generation robotic axes, trucks, shuttles, and NEVs.
Nvidia as AI infrastructure provider
Combining hardware chips with computing software appears to be Nvidia’s forte for the foreseeable future. Not only is Nvidia now among the Big Five, but the company also provides critical AI infrastructure to other tech giants as AI applications proliferate across all fields of knowledge, coding, and the arts.
This can be seen in Google Cloud’s use of Nvidia’s L4 Tensor Core GPUs for generative AI applications. Another chip line, the H100 Tensore Core GPU, is also used by Amazon Web Services (AWS), Google Cloud, Microsoft Azure and Oracle Cloud. In other words, current AI applications are almost entirely powered by Nvidia chips.
If this trend continues, Nvidia will position itself as a Big Tech AI enabler, following Microsoft’s Windows dominance. However, other challengers are also at play. Nvidia’s historical rival, Advanced Micro Devices (AMD), experienced a similar weekly gain of 21%.
Still, Nvidia owed its pre-AI success to the dominance of GPU chips, and now AI is more focused on CPUs than GPUs.
“Instead of retrieving data, you retrieve some data, but you have to use AI to generate most of the data. So you will have fewer CPUs, not millions of CPUs, but they will be connected to millions of GPUs ,”
CNBC Interview with Jensen Huang
This gives Nvidia an advantage over AMD and Intel, which have yet to make a convincing performance case for their Arc-series GPUs such as the A770 and A750. That being said, despite Nvidia’s dominance in high-end GPUs, Apple and Qualcomm have yet to launch mobile chips designed for AI upscaling.
This is the most likely market split on the horizon. Meanwhile, Nvidia’s proprietary software combined with high-performance chips makes it a winning combination for the stock.
Do you think Nvidia will hit the $1 trillion milestone next month? Let us know in the comments below.
about the author
Tim Fries is the co-founder of The tokenist. He holds a Bachelor of Science degree. BS in Mechanical Engineering from the University of Michigan and MBA from the University of Chicago Booth School of Business. Tim was a Senior Associate in the investment team in RW Baird’s US Private Equity division and co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
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