Nvidia Cashes in on AI Growth

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According to recent reports, generative artificial intelligence (AI) technology is expected to grow at 58% CAGR to reach $36 billion by 2028 from $3.7 billion this year. Nvidia (Nasdaq: NVDA) is cashing in on this by expanding its computing offerings to cater to the growing demand.

Nvidia’s Financials

It recently announced its first quarter earnings. Revenues were down 13% to $7.19 billion, but ahead of market estimates of $6.5 billion. EPS was $1.09, also ahead of market estimates of $0.92.??

By segment, data center revenues grew 14% to $4.28 billion. Gaming revenues were down 38% to $2.24 billion.

For the second quarter, the company forecast revenues of $11 billion, while the consensus estimate is at $7.1 billion.

Nvidia’s Growing Offerings

Generative AI is driving exponential growth in compute requirements and a fast transition to Nvidia accelerated computing. The growth of generative AI is driving Cloud service providers (CSPs) to deploy Nvidia’s flagship Hopper and Ampere architecture GPUs to meet the demand for AI applications for training and inference. In addition to enterprise AI adoption, CSPs also serve strong demand for Nvidia’s offerings from generative AI pioneers.

Consumer internet companies are also adopting generative AI and deep learning-based recommendation systems, driving strong growth. For instance, Meta has deployed the H100-powered brand Teton AI supercomputer for its AI production and research teams. Enterprise demand for AI and accelerated computing is strong, and AI computing is becoming integral to customers’ innovation road maps and competitive positioning.

This quarter, Nvidia started shipping DGX H100, its Hopper generation AI system, which customers can deploy on-prem. Whether the customers deploy DGX on-premise or via DGX Cloud, they will now get access to NVIDIA AI software, including NVIDIA-based command, end-to-end AI frameworks, and pre-trained models. The access provides them with the blueprint for building and operating AI, spanning systems, algorithms, data processing, and training methods.

Recently, Nvidia announced its partnership with ServiceNow to develop powerful, enterprise grade generative AI capabilities that have the ability to transform business processes with faster and more intelligent workflow automation. As a part of the partnership, ServiceNow is creating custom large language models trained on data specifically for its ServiceNow Platform, expanding its already extensive AI functionality with uses for generative AI across the enterprise to strengthen workflow automation and rapidly increase productivity. The partnership also has ServiceNow helping Nvidia with streamlining IT operations using generative AI tools. The collaboration will let ServiceNow create new enterprise-grade generative AI offerings with thousands of enterprises worldwide running on the ServiceNow platform.

Founded in 1993 by Chris Malachowsky, Curtis Priem and Jensen Huang, Santa Clara-based Nvidia is a computing platform that operates with graphics, HPC, and AI. The company has raised $4.1 billion in six rounds of funding, with the most recent round held in May 2023, where it raised $5 million led by ARPA-E, ARK Investment Management, SoftBank Vision Fund, DARPA, Jean Abrial, TriplePoint Capital, and Sequoia Capital.

Nvidia went public in January 1999 at a valuation of $626 million and a share price of $12. It is currently trading at $426.53 and a market capitalization of $1.05 trillion. It hit a 52-week high of $437.21 earlier this month and a 52-week low of $108.13 in October last year.

Disclosure:?All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.

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