The three mid-ranking Nvidia engineers in Silicon Valley had just $40,000 (£31,500) when they founded the company three decades ago, driven by the belief that 3D graphics would transform the fast-growing video game industry.
Now she It costs the same amount to buy just one Nvidia microprocessor. Can’t get enough of them.
The boom in artificial intelligence (AI) has made Nvidia perhaps the most important technology company in the world And it got a value of over $1.2 trillion.
Its latest boost came on Wednesday night, when the company revealed that its quarterly profit has risen by a staggering 843% in just one year, from $656 million to $6.2 billion.
Sales in its data center business, which reflects demand for the best AI chips, rose 141% in just three months, beating even lofty expectations on Wall Street.
The best news for investors was that the company expected the party to continue, anticipating another jump in sales in the third quarter of this year.
Shares, which are already at a record high, were up 6.5% as markets opened on Thursday, and for some, the only question is how far they can go.
The recent surge has cemented Nvidia’s position as a leading global tech giant.
Jensen Huang, CEO and Principal Founder of Nvidia Corporation, has always had big ambitions.
The company decided to focus on video games in the 1990s when Huang noticed the demand for increasingly advanced computer graphics and anticipated the need for vastly more powerful chipsets as games moved towards more immersive, 3D worlds.
When Nvidia’s share price reached $100, Huang painted the company’s logo on his arm.
But even he wouldn’t have seen the surge of artificial intelligence that boosted his personal fortune to $42 billion.
Nvidia’s work in computer graphics in the 1990s led to the invention of the graphics processing unit (GPU), a type of microchip intended for computer games and video tasks.
However, GPUs also excel at other types of number processing.
Nvidia thrived during the cryptocurrency booms of 2017 and 2021, as its processors proved highly efficient at the high-powered mathematics needed to mint new bitcoins.
It also had a short flurry of excitement around Metaverse, the virtual reality championed by Mark Zuckerberg.
However, the AI boom overshadowed all of that.
Large language paradigms like ChatGPT and Google Bard require thousands of GPUs, both for their initial “training” and for subsequent interactions known as inferences.
Almost every company and government is moving towards investing in artificial intelligence.
Amazon, Microsoft and Google, which operate the giant cloud computing data centers on which AI models generally run, are placing orders worth billions of dollars to Nvidia.
In a sense, Huang is fortunate that his video game chips are so well-suited to AI, but his allies dismiss suggestions that he has simply found a pot of gold.
“He was one of the first people to think about and study AI,” says a former Nvidia executive.
“Jensen had big ears, and he was listening to what was going on, and he was experimenting and investing in how to tweak these GPUs to be better at these things.
“He made the decision to bet big on AI around 2018.”
Today, the company faces competition from chip giants AMD and Intel but is off to a strong start. So much so, that Nvidia is now practically synonymous with AI itself.
The company’s results on Wednesday were seen as crucial because they indicated that its jump in sales was not just one step but part of a sustained increase in investment.
Huang said there is now a “tipping point” where companies are shifting more of their investment to AI technology. “The new age of computing has begun,” he added. ‘Our demand is enormous’
However, not everyone buys what Hwang sells. There are concerns that the general public’s interest in ChatGPT is waning.
Analysis of web traffic data shows that the number of visitors to OpenAI’s ChatGPT website decreased by 10% in June.
While ChatGPT’s prosperity relied on companies Buy large swathes of Nvidia chipsNow, companies like Meta support AI algorithms that need less computing power.
Meanwhile, some investors decided that the huge rise in Nvidia’s stock price made it unpalatable.
One investment house, AXS Investments, has even launched a fund dedicated to taking short positions against Nvidia – betting its shares will drop. Investors have so far invested $100 million in the fund.
High demand for the company’s processors in China It is also possible that it will fail due to US sanctions. The White House has already blocked the sale of some of its most powerful AI chips to Beijing, and it could go further.
Greg Pasuk, chief executive of AXS Investments, says Nvidia’s valuation “causes suspicion among some investors concerned about geopolitical implications for the company’s growth prospects”.
He adds that investors are now looking into whether the company’s “exuberant growth in artificial intelligence can continue at this pace.”
However, so far this year short sellers are suffering massive losses by betting that Nvidia’s share price will drop and fall by more than $11 billion, according to analysts S3 Partners.
“Nvidia hardware is becoming indispensable to the AI economy,” said Jacob Born, an analyst with Insider Intelligence. “Its results show how important the tech giant is to the current economic growth narrative that rests on expectations that AI will raise productivity and unlock trillions in economic value.”
If Nvidia can secure even a small part of those trillions, it may be unstoppable.