Nvidia’s rally is not over. Is generative AI another Silicon Valley bubble or the start of a new financial era?
Nvidia’s rise to the stars is not over yet, as made clear by the chipmaker’s latest quarterly earnings report. For the fourth quarter in a row, Nvidia broke Wall Street estimates, posting a three-digit growth when compared to last year.
Revenues for the January-March period jumped a mindblowing 427% year-on-year to $26 billion, compared to $24.7 billion expected by Bloomberg-polled analysts. Earnings-per-share came in at $6.12 compared to market estimates of $5.65.
Net profits were also far higher than expected at $14.9 billion. In the same quarter last year, Nvidia’s net earnings were $2.04 billion.
For the current quarter, Nvidia expects $28 billion in gross revenues, while analysts predict $26.6 billion.
The outstanding result proves the demand for AI chips keeps soaring, while enthusiasm for this new technology is far from wavering down.
Nvidia designs some of the most requested AI chips on the market, with clients like Microsoft, Meta, and Google. Rumors around its chips’ starting prices put them at $30,000 a piece for the most advanced models.
The company was fundamental in the explosion of generative AI, providing the chips that power world-famous software like ChatGPT, Gemini, and DALL-E.
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A new bubble?
Following Nvidia’s earnings report, its stock prices jumped over 10% and broke the $1,000 level in intraday trading. Currently, Nvidia’s stocks trade at $1,051 each: a 118% jump year-to-date and 242.7% in the one-year period.
That places Nvidia’s market capitalization at $2.58 trillion, making it the world’s third most valuable company behind Microsoft and Apple.
The company’s rise was so spectacular it announced a share split similar to its big tech peers. Each owner of 1 Nvidia stock will receive 10 when the split becomes effective on June 7th.
However, many investors worry this may be another speculative bubble on the trail of the dot-com bubble in the early 2000s. Generative AI is another new technology with outstanding promises, and Silicon Valley investors are known to get far too excited about new toys.
Unlike during the dot-com bubble, however, Nvidia has no meaningful competitor. Demand for AI chips is simply too high and growing, with the number of suppliers remaining essentially the same. Though there are other large chipmakers in the US, like Intel or AMD, they missed the shooting gun, and nobody knows if it’s too late to catch up.
"People want to deploy these data centers right now," Nvidia CEO Jensen Huang said, "they want to put our [chips] to work right now and start making money and start saving money. And so that demand is just so strong."
