Post by Dividavi on Aug 24, 2023 6:30:18 GMT
Nvidia bets $25 billion that AI boom is far from over
finance.yahoo.com/news/nvidia-bets-25-billion-ai-011450600.html
FILE PHOTO: The logo of Nvidia Corporation is seen during the annual Computex computer exhibition in Taipei
Stephen Nellis and Max A. Cherney
Thu, August 24, 2023 at 8:14 AM GMT+7
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NVDA
+3.17%
By Stephen Nellis and Max A. Cherney
(Reuters) - Nvidia's CEO Jensen Huang said he expects the artificial intelligence boom will last well into next year and made what could be the largest single bet yet in the tech sector to back up his optimism.
The company's sales forecast on Wednesday blew past Wall Street's expectations and it said it would buy back another $25 billion of its shares, a move most companies make when their leadership thinks the company is undervalued. Nvidia's stock price, though, has more than tripled this year and was set to hit an all-time high after Wednesday's results.
Nvidia said it plans to ramp up production of its hardware into next year, quashing doubts that a few analysts had raised about how long the AI craze could last. The company has a near-monopoly on the computing systems used to power services like ChatGPT, OpenAI's blockbuster generative AI chatbot.
"We have excellent visibility through the year and into next year, and we're already planning the next generation infrastructure with leading (cloud computing firms) and data center builders," Huang told investors on a conference call.
In an interview with Reuters, Huang said two things are driving that demand: a switch from traditional data centers that were built around central processors to ones built around Nvidia's powerful chips, and the rising use of content generated by AI systems in everything from legal contracts to marketing materials.
"These two fundamental trends are what's behind everything that we're seeing, and we're about a quarter into it," he said. "It's hard to say how many quarters are ahead of us, but this fundamental shift is not going to end. This is not a one-quarter thing."
Huang's move to buy back stock when it is more expensive than it has ever been tops the bets that even other large tech companies are making on AI, but comes as its price-to-earnings multiple fell to about 43 from 60 after analysts upgraded their earnings estimates in May.
Microsoft said the $10.7 billion in capital expenditures it made in its fiscal fourth quarter - a large portion of which went toward Nvidia hardware - is a figure that would continue to rise. It has also invested $10 billion in OpenAI.
Meta Platforms, Amazon.com's cloud computing unit AWS and others have also bet tens of billions of dollars collectively on AI-related hardware and products.
Demand for the chips has given Nvidia the cash for the investor payday. The company reported its adjusted gross margins nearly doubled to 71.2% in its second quarter, when most semiconductor companies have gross margins between 50% and 60%.
Kinngai Chan, an analyst at Summit Insights Group said Nvidia's inventory of $4.32 billion is "light."
"We think (Nvidia) will continue to beat the $16 billion guide for the October quarter as demand continues to outstrip supply," Chan said, referring to the company's third-quarter revenue outlook.
To be sure, some analysts don't see unlimited demand. Dylan Patel of SemiAnalysis said many tech companies are spending heavily on Nvidia graphics processing units (GPUs) this year before determining how they will actually make money off products developed with those chips.
"They must overinvest in GPUs or risk missing the boat. At some point the true use cases will shake out, and many of these players will stop investing, though others will likely continue accelerating investment," Patel said.
Huang declined to comment on whether the AI boom will last past next year. He said the biggest risk Nvidia faces is securing supplies.
The company said the biggest sales driver this quarter was its HGX system, which is an entire computer built around Nvidia's chip. That system is much more complex than just the chip itself, and any missing piece can delay shipments.
"We're getting great cooperation from our supply chain. And it's a complicated supply chain," Huang told Reuters. "People think it's a GPU chip. But it's a very complicated GPU system. It's 70 pounds. It's 35,000 components. It's $200,000."
(Reporting by Stephen Nellis and Max Cherney in San Francisco; Additional reporting by Chavi Mehta; Editing by Sonali Paul)
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Nvidia’s Strong Delivery on AI Jumpstarts Asian Chip Stock Rally
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Nvidia’s Strong Delivery on AI Jumpstarts Asian Chip Stock Rally
Kurt Schussler and Youkyung Lee
Thu, August 24, 2023 at 9:01 AM GMT+7
In this article:
NVDA
+3.17%
(Bloomberg) -- Asian semiconductor stocks got a fresh boost from a stellar set of results at Nvidia Corp., the standard bearer of the artificial intelligence theme that propelled gains in the sector earlier this year.
The Bloomberg Asia Pacific Semiconductors Index climbed as much as 2.5%, the most since July 11. A trio of Nvidia suppliers seen as among the region’s biggest beneficiaries of the AI boom led the gains, with South Korea’s SK Hynix Inc. and Japan’s Advantest Corp. each jumping more than 5% and Taiwan Semiconductor Manufacturing Co. rising 2%.
Nvidia’s results for the latest quarter and its outlook for the current period trumped analyst expectations on a surge in demand for its AI processors. The emerging technology has helped the US chipmaker overcome a slump in more traditional semiconductor business, and driven its share price to more than triple in value so far in 2023.
Nvidia Soars as Insatiable AI Demand Fuels Blowout Forecast
The latest blowout results sent Nvidia shares soaring 10% in US post-market trading Wednesday. The jump provided a fresh tailwind for Asian chip stocks, helping the Bloomberg Asia chip gauge pare its decline from a June high. The measure is still up 19% year to date.
“Nvidia’s post-market surge is favorable,” said Seo Sang Young, a strategist at Mirae Asset Securities Co. “It has raised expectations for the AI industry that it isn’t just a temporary theme.”
While the AI rally is getting a fresh leg up, risks remain for stock investors, including valuations. Advantest is trading at about 10 times book value while Nvidia is at 48 times, both having reached all-time high levels this year.
Stocks flying so high are subject to big drops if results disappoint. And if competing products emerge, prices of Nvidia chips could tumble said Lee Seung-Woo, an analyst at Eugene Investment & Securities Co.
“It’s a matter of how long this peak will be maintained and whether its rivals can catch up,” he said.
