The hottest tech stock so far this morning is Nvidia Corp. As of the time of this writing, Nvidia shares (ticker: NVDA) are up over 26% in pre-market trading. The massive surge in Nvidia’s share price is thanks primarily to one thing: the boom in generative AI technologies like ChatGPT. Here’s what you need to know.
- What’s happened? Yesterday, Nvidia announced its first-quarter earnings for fiscal 2024. The earnings results were good. Nvidia beat expectations on both revenue and earnings per share. The company announced that Q1 2024 revenue came in at $7.19 billion, up 19% from the earlier quarter—but that’s still 13% lower than the same quarter a year ago. Still, NVDA stock is currently up over 26% in pre-market trading.
- Wait, if revenues are lower, why is the stock up? The stock surge all comes down to generative AI, the technology that powers everything from ChatGPT to apps that can create photographs and movies from nothing more than a text prompt. In Nvidia’s forward-looking statements, the company forecast Q2 2024 revenue of $11 billion—which blows past Wall Street estimates of $7.15 billion, reports CNBC.
- Has Nvidia released its own generative AI app? Nope.
- What’s the deal, then? Generative AI requires very powerful chips to run on. Many generative AI technologies utilize the processing power of powerful graphics chips, known as GPUs, which were originally designed for gaming and advanced 3D rendering. Nvidia is one of the world’s leading makers of GPU technology and it also has data centers packed with the technology it rents out to companies that need the use of powerful chips—companies like those involved in generative AI. And as more companies get into generative AI, Nvidia’s technology will only be more critical to their workflow.
- So the generative AI boom is very good for Nvidia’s bottom line? It looks that way. Or as Nvidia’s founder and CEO explained in a company press release, “The computer industry is going through two simultaneous transitions—accelerated computing and generative AI. A trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service, and business process. Our entire data center family of products—H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand, and BlueField-3 DPU—is in production. We are significantly increasing our supply to meet surging demand for them.”
- What about other chipmakers? After Nvidia announced its forecast and NVDA shares surged to a year-to-date high of $389 in pre-market trading, another chipmaker’s shares also started surging. As of the time of this writing, shares for Nvidia competitor Advanced Micro Devices (AMD) are up nearly 10% to over $118.
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