NVIDIA has transformed into an AI company now
Its shares have experienced a remarkable increase of over 150% this year, positioning it to potentially become the first chip company with a market valuation of $1 trillion. In today's Finshots, we must discuss the journey that led NVIDIA to this point
30 years ago, Nvidia operated as a gaming company, albeit in a unique way.
While they didn't develop games themselves, they specialized in producing high-quality graphic processing units (GPUs). These cards, when integrated into a computer, significantly enhanced its computational capabilities. As a result, games could be rendered with astonishing realism, providing an immersive experience for the players.
Later, Nvidia ventured into the realm of cryptocurrencies, to some extent.
The demand for GPUs from the crypto community played a significant role in Nvidia's transformation. Miners required powerful processing capabilities to perform complex calculations for the generation of Bitcoins and Ethers. By utilizing multiple Nvidia GPUs, they could rapidly process numerous computations.
Simultaneously, Nvidia was discreetly evolving into an AI company. Surprisingly, the renowned ChatGPT, which has gained widespread popularity, incorporates Nvidia technology. The supercomputer powering OpenAI's ChatGPT relied on 10,000 of Nvidia's renowned chips.
However, it wasn't until Wednesday when Nvidia's financial results were announced that the true extent of the demand from AI-related companies for their GPUs became evident. Nvidia made astonishing projections, stating that it would generate $11 billion in the next quarter solely due to AI, surpassing analysts' predictions of $7 billion by a substantial 50%.
This announcement delighted investors, causing the company's shares to surge by 24% in a single day. Nvidia came close to reaching a market capitalization of $1 trillion, surpassing the combined value of its two largest US competitors, Intel and AMD.
Nevertheless, Nvidia's remarkable overnight success is the culmination of many years of dedicated efforts and strategic developments.
During a call with analysts, Nvidia's CEO confidently proclaimed that the company would pioneer a groundbreaking field known as GPU computing. However, at that time, nobody truly comprehended the immense potential behind this statement. It went unnoticed.
The game-changing moment for Nvidia arrived with the introduction of CUDA. Unlike any other chip manufacturer, Nvidia seamlessly integrated hardware and software, elevating the capabilities of its chips to unprecedented heights. These chips began performing tasks that were once taken for granted.
For instance, imagine Netflix wanting to identify the next binge-worthy show or determine which TV show image would generate more clicks. AI models are required for such predictions. Similarly, Volkswagen might aim to develop intelligent driving systems, such as lane-keeping technology, which relies on complex calculations performed by the car's computer.
Both of these tasks necessitate powerful processors to handle the intensive background work. This is where Nvidia's GPUs came into play, spearheading the AI revolution.
Yet, much of this work remained invisible to the general public. A significant breakthrough was needed to capture attention. That's when ChatGPT emerged as the X-factor. Suddenly, the change wasn't just incremental; it was a paradigm shift. With a few simple prompts, individuals could generate content, craft stories, and even write code. Such a scale of transformative capability had never been witnessed before, capturing people's attention.
And as they paid attention, they realized that Nvidia was at the epicenter of this revolution.
The 10,000 chips employed by ChatGPT were priced at a staggering $10,000 each, resulting in a total value of $100 million. With every company seeking to harness the power of AI, one can only imagine the substantial financial gains Nvidia can achieve with its GPUs.
Analysts and investors find themselves unable to contain their excitement. This is because Nvidia controls a staggering 88% of the world's GPUs. Competitors such as AMD and Intel appear to be lagging behind, seemingly irrelevant to the race. While Nvidia's AI chip business grew by 14% in the first quarter of this year, AMD experienced no growth, and Intel's business division declined by 39%.
It is evident that the AI race now rests firmly in Nvidia's hands, and losing this position seems unlikely.