Nvidia CEO says AI-generated videos will boost sales of the company's graphics chips

(Reuters) – For chip designer Nvidia, the boom in generative artificial intelligence is the gift that keeps on giving.

Riding the surge in demand caused by big tech companies rushing to adopt chatbots, Nvidia is hoping that new AI models that can create videos and interact with human-like voices will further boost orders for its graphics processors.

“There's a lot of information in life that needs to be backed up by video and physics. That's the next big thing,” Nvidia CEO Jensen Huang told Reuters on Wednesday.

“We have 3D video and there's a lot to learn from that, so these systems are going to be pretty large scale.”

The need for more computing power to train and run advanced AI systems is driving demand for Nvidia's Grace Hopper chips, such as the H200, which was first used in OpenAI's GPT-4o, a multimodal model capable of lifelike voice conversations with the ability to interact between text and images.

Other Nvidia customers, including Google DeepMind and Meta Platforms, have also released AI image and video generation platforms.

The company on Wednesday forecast quarterly revenue that will be significantly better than expected after its data-center division's sales grew more than five-fold in the first quarter.

Chipmaker Nvidia rose 9% on Thursday, as the company's upbeat earnings outlook helped bolster stocks across the semiconductor industry.

“Demand is broad and large language models are becoming increasingly multi-modal and need to understand not just video but text, speech, 2D and 3D images,” said Darren Nathan, head of equity analysis at Hargreaves Lansdown.

AI models for video used in the automotive industry have also emerged as a major driver of demand for Nvidia chips.

Tesla has expanded its fleet of H100 processors for training AI to about 35,000 as it works to power self-driving cars, Nvidia Chief Financial Officer Colette Kress said in a conference call after the company's earnings release on Wednesday.

Kress added that the automotive industry is expected to be the largest enterprise segment for NVIDIA's data center business this year.

“(Video generation) is certainly one of the powerful and proven use cases for AI, and it's expanding beyond just content creation,” said Hargreaves Lansdown's Nathan.