🧐 ProPicks AI October update is out now! See which stocks made the listPick Stocks with AI

Explainer-Why are Nvidia's shares soaring and what is its role in the AI boom?

Published 2023/05/25, 19:55
Updated 2023/05/25, 22:54
© Reuters. FILE PHOTO: The logo of technology company Nvidia is seen at its headquarters in Santa Clara, California February 11, 2015.  REUTERS/Robert Galbraith
INTC
-
MSFT
-
GOOGL
-
AAPL
-
AMZN
-
NVDA
-
AMD
-
TSLA
-
META
-
GOOG
-

(Reuters) - Nvidia (NASDAQ:NVDA) Corp closed in on a trillion-dollar market value on Thursday as shares surged 25% following a bumper earnings report that forced Wall Street to reassess the potential windfall for the chipmaker from an artificial intelligence boom.

Here's an explainer on Nvidia and its role in AI boom.

HOW BIG IS NVIDIA IN TERMS OF MARKET VALUE?

The semiconductor company's shares have risen more than 160% this year, adding $586 billion in market value, and making it the fifth most valuable U.S. company behind Apple (NASDAQ:AAPL), Microsoft, Alphabet (NASDAQ:GOOGL) and Amazon.

FROM GAMING TO AI: NVIDIA'S FOCUS SHIFT

Nvidia, known for its chips used in videogames, pivoted to the data center market over the last few years.

The company's business rapidly expanded during the pandemic when gaming took off, cloud adoption surged and crypto enthusiasts turned to its chips for mining coins.

Data center chip business accounted for more than 50% of the company's revenue in the financial year ended Jan. 29.

WHY IS GENERATIVE AI A HOT TOPIC?

The viral chatbot, ChatGPT, has made generative AI a buzzword this year. The technology uses vast troves of pre-existing data to create new content ranging from poems to images and even computer code.

Microsoft Corp (NASDAQ:MSFT) and Alphabet Inc-owned Google, two of the biggest players in the space, believe that generative AI can change how work is done. The two have raced to add the technology to their search engines and productivity software as they seek to dominate the industry.

Goldman Sachs analysts estimate that U.S. investment in AI could approach 1% of the country's economic output by 2030.

WHAT IS NVIDIA'S ROLE IN THE AI BOOM?

The large computers that process data and power generative AI run on powerful chips called graphics processing units (GPUs).

Nvidia produces about 80% of GPUs, according to analysts.

GPUs are designed to handle the specific kind of math involved in AI computing very efficiently. By contrast, generic central processing units from companies like Intel (NASDAQ:INTC) handle a broader range of computing tasks with less efficiency.

OpenAI's ChatGPT, for example, was created with thousands of Nvidia GPUs. Tesla (NASDAQ:TSLA) CEO Elon Musk has also secured GPUs from Nvidia for his AI startup, the Financial Times reported in April.

© Reuters. FILE PHOTO: The logo of technology company Nvidia is seen at its headquarters in Santa Clara, California February 11, 2015.  REUTERS/Robert Galbraith

WHO ARE NVIDIA'S RIVALS IN THIS MARKET?

Nvidia's main competitors include Advanced Micro Devices (NASDAQ:AMD) and AI chips made in-house by companies such as Amazon.com (NASDAQ:AMZN), Google and Meta Platforms (NASDAQ:META).

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.