Jensen Huang, the CEO and co-founder of Nvidia, is experiencing a moment of great success. Following the release of another exceptional earnings report that delighted Wall Street, Huang’s semiconductor company reclaimed its position as the world’s third most valuable company from Alphabet, Google’s parent company.
In early trading on Thursday, Nvidia’s shares surged by over 15%, fueled by the chipmaker’s outstanding quarter, which reassured investors about the continued positive impact of the AI revolution on the company’s future. During the post-earnings conference call on Wednesday, Huang emphasized the growing influence of AI and Nvidia’s pivotal role in what some have described as the contemporary gold rush. He expressed, “Accelerated computing and generative AI have reached a critical juncture. Demand is rapidly increasing globally across various companies, industries, and nations.”
With a net worth exceeding $60 billion, Huang underscored the transition from conventional computing to “accelerated computing” in data centers as a key driver of Nvidia’s triumph, portraying it as “a revolutionary approach to computing” or even “an entirely new industry.”
The foundation of all modern application features such as recommendations and personalization, according to Huang, relies on what he terms “tokens” for AI companies. These tokens, essential for the contemporary tech landscape, are utilized by biotech startups for creating new proteins and chemicals, as well as by OpenAI’s innovative generative AI text-to-video system named Sora. Nvidia’s AI tokens have become indispensable, as evidenced by the impressive revenue that exceeded expectations by $2 billion, reflecting the high demand for these tokens across industries.
Huang elucidated that the concept of AI-generation factories revolves around ingesting data to produce tokens for AI companies. He stated, “These tokens are what people experience on the amazing ChatGPT or Midjourney or search [engines].” Nvidia’s tokens are not only propelling the company’s growth, but also driving significant demand for its chips, prompting Nvidia to address the fair allocation of its products during the earnings call.
Following the robust earnings report, Huang confidently projected the widespread adoption of Nvidia’s AI Enterprise across all enterprises globally, envisioning it as a substantial business opportunity in the future. He asserted, “My guess is that every enterprise in the world, every software enterprise company… will run on Nvidia AI Enterprise.”
The expectations from Wall Street for Nvidia in the upcoming year are exceedingly high, with analysts forecasting a median price target of \(832, indicating a 24% surge from Nvidia’s pre-earnings stock price. Some analysts, like James Demmert from Main Street Research, anticipate Nvidia’s shares reaching \)1,000 within the next 12 months, emphasizing the growing demand for artificial intelligence and Nvidia’s potential for further expansion.
Despite the optimism, there are skeptics like Gil Luria from D.A. Davidson, who foresee a potential slowdown in demand for Nvidia’s products in the future, particularly in the data center business. Luria cautioned that a decline in demand could occur by 2025 as major customers, including tech giants, may reduce their AI spending after an initial surge to meet the current demand.
While some analysts advocate caution regarding the long-term growth prospects of AI chipmakers, highlighting concerns about an “AI bubble,” the market’s expectations for continuous exponential earnings growth may be unrealistic. Dhaval Joshi, the chief strategist at BCA Research, expressed skepticism about the prolonged dominance of generative AI and cautioned investors about the sustainability of this trend over the next decade.
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