These five charts outline how Nvidia climbed to the top.
Chips used to render graphics have underpinned the company’s bottom line for years, while other categories of computing and networking were boosted by areas such as cryptocurrency mining. (1) After that, the graphics sector plummeted, and numerical computing made up for the shortfall.
The company’s graphics chips are primarily used for gaming, alongside professional applications such as 3D design. But to help companies like Microsoft Corp., Alphabet Inc., OpenAI and Amazon.com Inc. build AI capabilities and deliver those services to their customers, the company’s Increasing number of chips.
The release of ChatGPT last year sparked a frenzy of interest in generative artificial intelligence (AI that creates content instead of just analyzing information). Nvidia’s leadership position has caught the attention of investors, who have returned to stocks after cooling off following a massive rally in 2021.
One way to assess a company’s technological prowess is to see how much pricing power it has over its customers. This can be measured by looking at gross margins, the percentage markup you get on top of the cost of building a product. Intel Corp.’s heyday was his PC and laptop era. Nvidia currently holds the throne, posting record revenues due to high profits in AI chips and computers.
The world’s top tech companies don’t want to miss the AI boat, but they need to spend billions of dollars on expensive, specialized servers to make a name for themselves. Nvidia is the first choice, which means huge capital spending budgets will likely flow to chip makers, and much of Silicon Valley will cut thousands of jobs and replace many roles. And that trend is even stronger now, as AI promises to replace it.
How long and how high Nvidia rises will depend heavily on how big companies and consumers embrace and adapt to the AI boom. And while customers like Amazon.com Inc. are pushing into chip development, they need to stay ahead of rivals like Intel and AMD, who are looking to steal more of the pie. This once startup graphics chip maker may hold the crown today, but nothing is guaranteed in the world of artificial intelligence.
Details from Bloomberg Opinion:
• Moore’s Law Continues to Lead Chip Leaders: Tim Calpan
• The age of AI mimicry will make human mimicry cry: Palmy Olson
• AI contributes to the creation of chips that design AI chips: Tim Calpan
(1) Nvidia divides into two “reportable segments” defined as “Computing and Networking” and “Graphics”.
This column does not necessarily reflect the opinions of the editorial board or Bloomberg LP and its owners.
Tim Calpan is a Bloomberg Opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News.
More articles like this can be found at bloomberg.com/opinion.
