Developments in artificial intelligence (AI) in early 2023 marked a turning point for chipmaker Nvidia (NASDAQ:NVDA). The company's graphics processing units (GPUs), already the top choice for serious gamers everywhere, quickly dominated the data center space, providing the sheer number-crunching capability demanded by AI processing.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Since then, Nvidia's financial results have been on a blistering run, with a 1,490% increase in revenue and a 4,120% jump in net income. These blistering financial results have driven the stock up 1,410%, providing a windfall for shareholders along the way. Investors had begun to wonder if the results were sustainable, as Nvidia's market cap has swelled to $5.33 trillion, making it the world's largest public company (as I write this).
However, Nvidia says it has "greater visibility" heading into next year, and the repercussions for its results between now and then are staggering.
Image source: Nvidia.
The data center boom
To be clear, Nvidia's GPUs were the linchpin of the company's success, but it's the Compute Unified Device Architecture (CUDA) that gives Nvidia its seemingly insurmountable moat. This library of algorithms and software tools ensures that developers achieve the best performance from Nvidia's processors. With more than 400 pre-built libraries and thousands of specialized tools, GPUs can be adapted for a variety of complex tasks. When coupled with the company's industry-leading GPUs, the combination is hard to beat.
Nvidia has been crowned king of the data center space, where the vast majority of AI processing occurs. This has fueled the ongoing data center build-out, which is expected to drive $7 trillion in spending by 2030, according to global management consulting firm McKinsey & Company. Nvidia dominates the AI accelerator market, with an estimated 80% to 90% share, according to Silicon Analysts.
When Nvidia reported its Q2 results earlier this month, CEO Jensen Huang broke with a long-standing tradition, giving the company's first-ever full-year forecast -- and the numbers were staggering. Nvidia expects revenue to grow by 70% in 2028, sailing past Wall Street's consensus of 44% growth. The company noted that if not for the limited availability of memory chips, growth would be closer to 100%.
