The business world increasingly expects artificial intelligence to be the next big thing, and finds itself looking specifically to one computer chip manufacturer, Nvidia, to power that revolution. I did.
Since 1993, the Santa Clara, California-based company has designed programmable chips that help run an array of consumer applications.
Intel and Advanced Micro Devices have dominated the U.S. chip space for decades, but Nvidia's entry signals the arrival of advanced graphics processing units (GPUs) that can better render images. was. That feature has become increasingly important as high-quality video increasingly dominates the world of technology and media.
Initially, Nvidia was most associated with providing GPU processors for video game consoles such as Microsoft Xbox and Sony PlayStation.
The general growth of Silicon Valley in the 2010s prompted Nvidia to diversify and improve its fortunes. For example, in 2014, Nvidia and Google announced a partnership to use his Nvidia chips in Google Chromebooks.
Car companies have also started looking to Nvidia chips for use in driver-assistance software that relies on GPUs to process image information from sensors. Nvidia hardware is also installed in all his Tesla cars.
During the pandemic, the shift to remote work and subsequent demand for data centers to enable cloud-based computing, as well as an even greater interest in video games while everyone was stuck indoors. Nvidia's earnings accelerated even further.
Still, the company's annual revenue of $22 billion in 2022 remains small compared to rival Intel's $63 billion in the same year.
It wasn't until the past year and a half that Nvidia's prospects truly went stratospheric with the onset of the artificial intelligence revolution.
Nvidia's specialized chips are known as “discrete” GPUs and specialize in so-called parallel computing. It is a type of computing that performs multiple processes at the same time. In contrast, a CPU executes programs serially. Therefore, the type of computing that GPUs handle is more efficient and valuable than CPUs.
Programmers have learned that Nvidia's GPUs are much better suited for programming AI software.
Bloomberg News called NVIDIA's chips “the flagship product for training AI models,” and Amanda Agati, an analyst at PNC Financial Services Group, said NVIDIA was the top choice in this space last fall, based on the evaluation. He described his lead as a “quasi-monopoly.”
So Nvidia owes some of its success to pioneering the technology that AI applications now rely on.
Today, virtually every major technology company uses Nvidia chips, including Amazon, Google, Meta, Microsoft, and Oracle.
On Thursday, Nvidia reported earnings and earnings that far exceeded market expectations, pushing the company's overall value to more than $2 trillion and putting it behind only Microsoft and Apple among the largest U.S. companies.
“Accelerated computing and generative AI have reached a tipping point,” Nvidia CEO and co-founder Jensen Huang said in an earnings call. “Demand is surging around the world, across companies, industries and nations.”
According to Goldman Sachs, about $1.7 trillion of the market capitalization growth occurred in the past 16 months alone. In an interview with CNBC last year, Huang acknowledged that a combination of luck and skill led to the company's success.
“We believed that someday something new would happen. It just takes a coincidence,” Huang said. “It wasn't foresight. The foresight was accelerated computing.”
For Moody's Senior Vice President Raj Joshi, NVIDIA represents the “dominant” infrastructure player behind the current rise of the AI sector.
As other chip designers strive to catch up with Nvidia, the company's 30-year focus on GPUs has made it a standout compared to competitors like Intel, which has historically focused on CPUs. He said it represented a significant advantage.
“This emerging field is [AI] It's better supported by the GPU,” Joshi said in an interview with NBC News, adding, “In most cases, NVIDIA provides the foundation.”
Nvidia also offers solutions for other areas that aren't particularly technology-oriented, such as healthcare, Joshi said.
“They have a big lead in these markets,” he says.
Nvidia's specialization means it can charge a premium for its products. In fact, the company's chips, which are made in Taiwan, are so unique that companies looking to build AI capabilities are complaining of a chip shortage.
The Biden administration's CHIPS and Science Act of 2022 is intended to accelerate GPU development and is intended to encourage development within the United States, but there are already concerns about keeping up with market forces. there is.
“The amount of chips is [AI companies] The projects they require are mind-boggling,” U.S. Commerce Secretary Gina Raimondo said this week. She suggested that if the United States wants to play a significant role in chip manufacturing, it will need even more federal subsidies.
“If we want to lead the world, I think we're going to need continued investment, whether we call it 'CHIPS Two' or something else,” he said at an Intel event. Raimondo said in a virtual appearance. “We fell pretty far. We took our eye off the ball.”
Meanwhile, investor interest in NVIDIA remains feverish. While some have speculated that its success is a bubble, many Wall Street analysts say the company's financial statements prove its product is viable.
“The health of our core data center business is truly remarkable,” Goldman Sachs' Tony Pasqualiello wrote in a note to clients on Friday.
Because Nvidia's value has increased so much, its financial results carry more weight for the overall stock market, namely the S&P 500 index. Agati, PNC's chief investment officer and managing director of investments, said his Nvidia alone accounted for 60% of the revenue growth across his S&P 500 companies in the most recent quarter.
In other words, for now, as Nvidia grows, so does the market, which could be a financial boon for consumers who invest in the stock market, whether individually or through retirement accounts.
“[Nvidia] “It has become critical to the advancement of the market,” Agati said in an email to NBC News. “With the phrase 'data is the new oil,' NVIDIA is demonstrating that it is in a league of its own. “I continue to prove it,” he added.