Artificial intelligence: Nvidia’s revenue only grows – 08/24/2023 – Tech

Tech startups dream of generating the kind of earnings that US chipmaker Nvidia reported this year. The heightened interest in artificial intelligence, fueled by Nvidia’s chips, is far from over.

The company announced this Wednesday (23) that it doubled its revenue in the second quarter compared to the same period of the previous year, reaching US$ 13.5 billion, with a net profit of US$ 6.2 billion, an increase of 843% compared to the same period in 2022.

The results, far above the company’s forecast and also the market’s expectations, caused its shares to soar about 8% in operations after Wall Street closed on Wednesday (23). Since the beginning of the year, the company’s shares have increased by 200%.

In the current quarter, Nvidia expects revenues to increase about 170% year-over-year. Not only is this better than the competition, it also beats average startup growth.

Nvidia is reaping the rewards of plans begun decades ago. After the company went public in 1999, it pioneered the GPU (graphics processing unit), starting with the GeForce 256. GPUs were later configured to handle the data needed to train large language models for generative artificial intelligence.

Nvidia’s data center unit – which includes advanced AI chips – grew 171% to more than $10 billion in the latest quarter.

Geopolitics has limited market potential. Last year, the United States banned the export of high-end chips to China. Nvidia CEO Jensen Huang spoke about the dangers of further restrictions in a market that accounts for up to a quarter of data center sales.

But sales of Nvidia’s H100 and A100 chips elsewhere are picking up. Saudi Arabia and the United Arab Emirates are the latest buyers hoping to develop generative AI capabilities. Nvidia now says further restrictions on sales to China would not have an immediate impact on financial results.

It is reasonable to ask what kind of threat is posed by the determination of large tech companies to develop their own AI chips. Alphabet is working on a TPU (tensor processing unit) designed for this task and has the resources to achieve the goal. Free cash flow was seven times that of Nvidia last year. But Nvidia is busy preparing a more powerful GH200 chip for 2024.

For proof that growth can continue, look at the speed with which Nvidia is trying to ramp up production – a testament to the scarcity in the market. Over the next year, it plans to triple shipments of H100s.

Many technology stocks are struggling to reach the highs that were achieved in late 2021, when interest rates were low and sales were high. Nvidia has surpassed this handily. Earnings that beat forecasts mean that it trades at a lower future earnings multiple as well.

The company remains the only chip maker to surpass a $1 trillion market cap. The gap between the demand for AI chips and the amount Nvidia can produce paves the way for additional gains.