What's going on?
Nvidia wowed investors with some AI-powered quarterly results.
What does this mean?
Being a chipmaker is no great shakes these days. After years of pandemic-powered hyper-growth, Nvidia’s gaming business is still taking a hit – and the wider slowdown in the PC market has also been dragging on results. But there’s one thing that stands out as buoying things up for Nvidia right now: artificial intelligence (AI). See, Nvidia’s chips are exactly the kind of high-octane offerings needed to train software and make sense of big data sets – in short, to do what AI services need to do. And with tech companies going big on AI development, Nvidia’s data center segment has kept on growing. So sure, overall revenue was down 21% – but that drop wasn’t as sheer as analysts expected. That, and the firm’s impressive outlook, meant investors initially sent shares up 8%.
Why should I care?
The bigger picture: Leaning in.
Nvidia dominates the AI chip space, providing about 80% of the processors used to power the sector. That bodes well for the firm, especially since AI is one of the few things cost-cutting Big Tech is still splashing out on. In fact, analysts are now estimating that AI-based demand could add another $14 billion to the firm’s revenue by 2027, an opportunity that it seems determined to grasp: Nvidia just announced a new service allowing companies to access its processing power through the cloud, instead of having to build their own infrastructure. That bid could speed up the development of AI, and turn into a nice revenue stream before long.
For markets: AI entryway.
With opportunities like that ripe for the picking, it’s no wonder the firm’s stock is up 65% this year – a surge that’s returned Nvidia to the throne as the world’s most valuable chipmaker. And Wednesday’s update only seemed to confirm what some observers already suspected: that Nvidia could be emerging as the single most promising AI play right now.