AI chip boom takes Nvidia to new heights, gamers be damned

Bottom line: Nvidia sees the race to develop generative AI like ChatGPT and Midjourney as the iPhone moment for AI. More importantly, the company appears to be well positioned to capitalize on the growing demand for GPUs and AI accelerators, with a valuation close to $1 trillion this week. The latest financial report contains a good outlook, but it is also a reminder that gamer satisfaction is not a priority for the company. And probably won’t be as long as the tech industry is obsessed with AI.

Almost every business is trying to jump on the AI ​​train, and that makes Nvidia and its investors happier than ever. In fact, the company is so happy that it is confident that it will soon be able to become the first chip maker to be worth more than $1 trillion thanks to huge demand for data center GPUs and AI accelerators. Investors pushed up the share price, and as of this writing, it’s hovering around $384 (up more than 25 percent from Tuesday).

AI is one of the main reasons Nvidia’s data center business increased by at least 14 percent in the first three months of this year compared to the same period last year. For reference, Intel’s datacenters and AI Group recorded a staggering 39% drop, while AMD’s datacenter division posted flat revenue compared to the same quarter of 2022.

As you can see in the chart above, this is very important for Team Green, as this is where more than half of its revenue comes from for almost a year now. The company recorded sales to corporate customers of $4.28 billion, also above analysts’ expectations of $3.9 billion.

This partly explains why Nvidia shifted some of its GeForce RTX 4090 GPU production to its Hopper-based enterprise H100 GPUs. Companies such as Microsoft, Oracle, OpenAI, Twitter, Amazon and Google are buying large quantities of the latest product to train and run generative AI. By comparison, the RTX 4090 retails for about 1600 USDand used H100 cards sell for more $40,000 eBay. This makes even 4th generation Intel Xeon Scalable Sapphire Rapids processors cheap. $17,000.

Some companies like Microsoft, Meta, Amazon, and Google are investing in specialized silicon for their AI efforts, but that won’t dampen their appetite for Nvidia GPUs anytime soon. During a call with investors on Wednesday, Nvidia CEO Jensen Huang explained that the company has invested 15 years in hardware and software development, which puts it in the right position at the right time to capitalize on a large investment cycle from companies large and small. working on AI. services.

Jensen is no doubt happy that generative AI is becoming “the main workload of most of the world’s data centers,” but gamers are understandably less happy with Nvidia’s strategy with RTX 40-series graphics cards. models, PC enthusiasts are in no hurry to upgrade. This prompted Nvidia to announce a larger framebuffer variant of the RTX 4060 Ti, and we’re also seeing slight price cuts on existing models.

Nvidia’s gaming revenue in the first quarter of this fiscal year was $2.24 billion, down 38 percent from last year. The company blames this on the overall economic climate and the relatively slow rollout of the RTX 40 series GPUs. However, our very own Steven Walton took a look at the recently released RTX 4060 Ti and found it to be overpriced at $400. The higher-end models cost $600 and $800 respectively, so it’s not exactly an attractive option for gamers, although they offer better value for money.

Also Read: Is Nvidia now a software stock? Competitive advantage of CUDA

One thing is for sure: AI frenzy is transforming the tech industry, and Nvidia will stand to benefit the most with a CUDA software stack that is exclusive to its hardware offerings. Competitors have so far failed to create a true alternative and convince others in the industry to use it, although companies like AMD and Intel have definitely tried using tools like ROCm and oneAPI.

As a result, Nvidia is optimistic about the future and expects to generate about $11 billion in revenue in the current fiscal quarter. That would be 64 percent more than last year and set a new quarterly revenue record for the Jensen-led company. We’ll have to wait and see.