Nvidia is the technology company of the moment. The company achieved a stock market valuation of one trillion dollars last week, rising to the category of which only giants such as Apple, Microsoft, Saudi Aramco, Amazon, Google or Alphabet are part.
This company, born in Silicon Valley in 1993, has in its hands the future of generative artificial intelligence, popularized by one of its biggest clients, ChatGPT. Nvidia controls all of its gear, the hardware and software that make information flow at full speed, elaborating responses practically as if a human were behind it. The key to its success lies in the GPU (stands for “graphics processing unitâ€) chip, which has unique qualities that enhance the algorithm’s efficiency.
Nvidia’s popularity is the result of the vision of its founder, Taiwanese Jensen Huang. Based in the United States, he founded Nvidia with the purpose of addressing the market for chips that process video games. Over time, it opened up to data centers and companies that develop technology for the autonomous car, until last year it became the best ally of the fledgling industry of generative AI.
The potential of its technology is so great that euphoria has broken out in the US stock market. The company has shot up in value more than 170% so far this year, and 5% in the last week, to just under $1 trillion after peaking last Tuesday.
The rise in the stock market is explained by the potential of technology and the quarterly results, which exceeded analysts’ forecasts. In its first fiscal quarter of 2023, the company boosted revenue by 19% to reach 7,192 million dollars, while profit grew 27%, to 2,043 million dollars. In addition, the company forecast that this quarter the billing would increase to 11,000 million due to the pull of the AI ​​chip division.
The Nvidia phenomenon has spread to other competing companies, such as AMD (85%), AMSL (31%), Taiwan Semiconductor Manufacturing Company (23%) or Foxconn (9%), which have skyrocketed their valuation at a double-digit rate in so far this year.
These days, analysts were wondering: Is the sector entering an overvaluation bubble like the one that occurred in the early 2000s with the dot-com boom?
Although it is true that the development of generative artificial intelligence is also in an initial phase, the current situation is very different from what those pioneering Internet companies experienced then. According to Matt Tuttle, CEO of the US consultancy Tuttle Capital Management, “the manufacturers of chips and other products linked to the advancement of AI have other businesses on the side that would save them from bankruptcy in the event that AI were to fail. That did not happen in the early 2000s, since then the companies were not backed by a solid business behind them, but they were selling smoke â€, he points out.
However, Tuttle considers that after the boom experienced at the beginning of 2023 “valuations will undergo a downward correction and then go up again in a more sustained manner over time.” With growth forecasts, and the demonstrated potential of ChatGPT, it doesn’t look like Nvidia is going to have a bad year. Quite the opposite.
