NVIDIA - From Gaming Chips to AI Dominance
Someone asked me about NVIDIA last week. News emerged about this somewhat unpopular company outside the tech space becoming the world’s fourth most valuable company. It was 89th in Jan 2023.
In just a year, its revenue has tripled to $22.1 billion.
And this could just be the beginning.
I gained insight into the company’s humble beginnings from Chris Miller’s book, “Chip War.” When Jensen Huang and his two co-founders met at Denny’s (a restaurant) to establish the company in 1993, they decided to focus solely on making chips for video games. Gaming involves processing large amounts of data simultaneously, rather than sequentially.
In 2008, Huang realized that this method of processing data is also how artificial intelligence works. So, he pivoted Nvidia towards AI.
Now, with software like ChatGPT waking the world up to AI’s potential and nudging us towards what Huang calls an AI “tipping point,” his bet is paying off.
And because Nvidia started much earlier than the rest, it now sells about 80% of all AI chips (at $25k to $250k each). That’s how it was able to earn more than $22 billion in 2023 and became more valuable than Amazon, Google (Alphabet), and Facebook (Meta). As I write this, it is worth more than $2 trillion.
On Jan 6, 2023, Nvidia’s stock price was $148. Today, it’s $800.
As I mentioned, this could just be the beginning.
The notion that AI could boost productivity and profits for any industry and country is driving investors crazy and has led stock indices in the US, Japan, and Europe to record highs.
Governments are in on the game too. Singapore, China, the US, the UAE, and beyond have all been investing billions to develop national capabilities.
Regulators are trying to catch up. The UN has published AI processes, the EU has just finalized its AI Act, and Britain has come up with the Bletchley Declaration. All aimed at keeping things under control.
At the heart of all this is Nvidia.
Little wonder, Goldman Sachs just declared Nvidia the “most important stock on planet earth.”
Of course, anyone familiar with the ways of the market knows that once profit is sniffed, new entrants come rushing in like sharks who have smelled blood. And so, US firms like Intel and AMD are trying to close the gap with Nvidia, and China is pushing to close the gap with the US.
But looking at Intel and AMD’s sagging share prices, we are reminded that the technological climb is steep, and NVIDIA is king, at least for now.
