Last week, Nvidia briefly overtook Apple to become the world’s second-most valuable company at $3.01 trillion. While Nvidia shareholders and its chief executive were rejoicing, analysts and company observers said the future may not be so effortless. The Mint explains:
What explains Nvidia’s rise to the top table?
Nvidia’s rise to the top has been drastic, contributing to Nvidia’s meteoric rise from a mid-tier tech company to one of the world’s largest in less than two years. At the heart of this growth is artificial intelligence (AI) – as ChatGPT OpenAI has grown in popularity, Nvidia graphics processing units (GPUs), once known only to gamers, have come into the spotlight. Major companies around the world have rushed to buy their chips, with waiting lists now stretching back years. Nvidia’s dominance of GPU technology has also allowed it to control pricing, putting it in the right place at the right time to catch the biggest AI boom yet.
Is it convenient or is it already at risk?
He’s not in danger, but he’s certainly looking over his shoulder. CEO Jensen Huang in March unveiled its largest and most competent GPU – called Blackwell. The company is also looking to partner Taiwan Semiconductor Manufacturing Co (TSMC) for chip manufacturing to assist expand production capacity. But it can’t accelerate as speedy as it should – worldwide, demand for AI deployments in enterprises, data centers and researchers has skyrocketed. As a result, many brands are coming to the fore as rivals, and conversations have already begun about reducing the dependence of generative artificial intelligence on the high computing power of GPUs.
Who are Nvidia’s biggest rivals?
Intel and AMD. Intel’s history and chipmaking expertise led it to announce Gaudi-3, a dedicated AI chip that works with the sought-after Nvidia H100 processor. The second rival is the AMD MI300X GPU, which increases performance and utilization of solutions in enterprises. Industry observers say that even if Nvidia claims excellent performance, companies will likely choose availability over performance.
Is Massive Tech also influencing Nvidia?
Yes. Nvidia’s biggest clients include Google parent Alphabet, e-commerce giant Amazon, social media giant Meta Platforms and technology conglomerate Microsoft. The industry estimates that as much as 40% of Nvidia’s sales come from one of these four. What’s troubling for Nvidia is that each of these companies has invested in its own AI chip to reduce dependence on Nvidia. If this happens, Nvidia’s strength could decline and affect its market capitalization. However, sales may not drop immediately due to the huge number of pending orders.
Is this something that worries India?
Investment platform Fisdom estimates that Indian shareholder engagement is over ₹400 crore for Nvidia through mutual funds – A decline in the company’s market capitalization and share prices may impact those betting on technology-based funds. However, for Nvidia, India is a compact market – less than 1% of its global revenues are generated in India. Given India’s position as a growing economy, Huang would like to maintain good relations. However, India may not be the top priority for the company at the moment.
Posted: Jun 11, 2024 06:00 EST
