How the AI Boom Could Be Nvidia’s “iPhone Moment”

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Nvidia has projected $11 billion in sales for the current quarter, far above Wall Street estimates of around $7.2 billion.

Nvidia’s stock soared on Thursday after the chipmaker reported better-than-expected first-quarter earnings, beating analysts’ expectations regarding earnings and revenue. The company also provided a revenue forecast for the July quarter way above expectations, citing skyrocketing demand for its artificial intelligence chips with the generative AI boom.

AI Boom Could Mark Nvidia’s “iPhone Moment”

Thanks to the surging demand for its artificial intelligence chips, Nvidia expects record sales in the near term. The company has projected $11 billion in sales for the current quarter, far above the $7.2 billion Wall Street estimated and the highest quarterly total ever for the firm.

Nvidia CEO Jensen Huang said the company is working on a new generation of advanced Nvidia chips for AI calculations in data centers to meet the surging demand. “We are significantly increasing our supply to meet surging demand for them,” he added. 

Analysts say Nvidia’s chips are essential to creating AI language-generating tools like ChatGPT. Since AI tools require vast amounts of data and enormous processing power, building just one AI system can require thousands of chips, which opens a huge new revenue opportunity for Nvidia — and could mark the company’s “iPhone moment.”

Huang said operators of big data centers are retooling their computing infrastructure to address better the opportunities offered by AI. He added:

“A trillion dollars of installed global data center infrastructure will transition from general-purpose to accelerated computing as companies race to apply generative AI into every product, service and business process.”

Nvidia Diversifies into AI to Expand its Userbase

Nvidia has inked partnerships with Amazon, Google, and Microsoft to help them develop generative AI services. On Tuesday, the chipmaker also announced adding its AI software to Microsoft’s Azure cloud-computing service to allow corporate customers to tap into the technology. 

Historically, Nvidia has primarily had roots in graphics-processing chips for video gaming, but it has broadened its customer base by diversification into AI and cryptocurrency mining. The surge in demand for its graphics chips by cryptocurrency miners caused severe supply shortages and price hikes last year, prompting the company to create specialized chips for these markets. 

More recently, the company’s AI chips helped its data center division surpass its gaming division in revenues. This has even prompted the chipmaker to offer a new generation of AI chips for data centers that promise a substantial performance upgrade.

Earlier this month, Nvidia announced the shipment of its DGX H100 systems. The product features eight H100 Tensor Core GPUs that are connected via NVLink, alongside dual Intel Xeon Platinum 8480C processors, 2TB of system memory, and 30 terabytes of NVMe SSD, the company said in a blog post.

The “iPhone moment,” derived from the explosive adoption of smartphones and phone apps, refers to a situation when an emerging technology disrupts as businesses pivot towards it. 

Nvidia Beats Wall Street Estimates in Q1

On Thursday, Nvidia released its earnings report for the year’s first quarter. The company reported $7.19 billion in revenue, compared to the expected $6.52 billion, beating estimates by a wide margin. 

Furthermore, the chip maker’s data center revenue was $4.28 million instead of the projected $3.9 billion. The company’s earnings and earnings per share were similarly impressive, beating the expected $0.92 and amounting to $1.09.

The strong first-quarter results follow a lukewarm performance throughout 2022 which saw its share price drop repeatedly on decreasing revenue. Part of the decline in revenue was a slowdown in demand for mining chips after Ethereum transitioned to a Proof of Stake (PoS) consensus mechanism.

Originally Posted May 25, 2023 – How the AI Boom Could Be Nvidia’s “iPhone Moment”

Disclosure: Ruholamin Haqshanas has no positions in any of the stocks mentioned, and has no plans to initiate any positions within the 72 hours following the publishing of this article. This article expresses the opinions of Tim Fries. Tokenist Media LLC has no position in any of the stocks mentioned, and does not plan to initiate any positions within 72 hours of the publishing of this article. Please consult our website policy for more information.

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