RISE OF NVIDIA
- Sneha
- Jun 24
- 6 min read
Updated: Jul 2
INTRODUCTION
With the advancement in computations, it is apparent that new technologies will thrive. Similar advancement can be seen in the field of technology. Statistics exhibit how computations have amplified by over 1000 times in the past eight years. In this supersonic world, we are clearly experiencing insane advancements in distinct fields of technology. A similar sensation currently is about the rise of Nvidia Chips in Artificial Intelligence. Nvidia's AI chips, also known as graphics processor units (GPUs) or “accelerators”, were initially designed for video games. They use parallel processing, breaking each computation into smaller chunks, then distributing them among multiple “cores”—the brains of the processor—in the chip. Let’s dive deeper into it.
Unquestionably, Nvidia's journey to becoming a tech titan has been remarkable. Once a niche player in the graphics processing unit (GPU) market, it's now a trillion-dollar company at the forefront of artificial intelligence (AI).
NVIDIA’S JOURNEY
From Gaming to AI Powerhouse: Nvidia's foundation lies in developing GPUs for gamers, known for their smooth, high-resolution visuals. However, the company's true growth came with the adaptability of its GPUs for complex AI computations. This shift positioned Nvidia as a key player in the booming field of AI, transforming various industries.
AI Revolution: Nvidia's GPUs, with their parallel processing capabilities, proved perfect for complex AI computations. This adaptability fueled their expansion into AI, a booming field transforming various industries.
Data Center Domination: The surge in AI demand led to a boom in data centre GPUs, a market Nvidia leads. Their chips power everything from self-driving cars to medical research.
A Trillion-Dollar Success Story: In 2023, Nvidia joined the elite trillion-dollar market cap club, solidifying its position as a leader in the tech industry. Nvidia's success is a prime example of a company capitalising on technological advancements and adapting to evolving market needs.
Nvidia's success story is a prime example of a company capitalising on technological advancements and adapting to evolving market needs.
WHAT DO THEY DO
So, why is Nvidia stock going up so aggressively? The most obvious answer is the rising interest in AI, generative AI, and LLMs. Technical analysis has shown a growing demand for Nvidia’s collection of advanced chips capable of powering the latest AI innovations.
Nvidia produces chips capable of crunching massive amounts of data with exceptional efficiency.
The chip companies need to train cutting-edge AI programs like OpenAI’s ChatGPT 4 and Google’s PaLM 2. As demand for intelligent and spatial computing increases, businesses need hardware that supports high amounts of memory.
Many investors believe we’re only at the tip of the iceberg regarding AI demand. This could mean Nvidia has excellent potential for additional growth. However, it also suggests the tech company will face increasing competition in the years ahead.
COMPANY PERFORMANCE OVERVIEW
Nvidia Corp, serving five primary markets—data centre, gaming, professional visualisation, automotive, and OEM—boosted its market share to approximately 34.89% due to exceptional overall performance, with significant gains in the first four markets. It has recorded quarterly revenue of $26.0 billion, up 18% from Q4 and up 262% from a year ago in the overall financials.
For the Data Centre market, first-quarter revenue was a record $22.6 billion, up 23% from the previous quarter and up 427% from a year ago.
Initiatives: The reasons for these surges were that Nvidia made significant strides in AI computing with the Blackwell platform and DGX SuperPOD™ for generative AI. They launched NVIDIA Quantum and Spectrum™ X800 series switches, enhancing trillion-parameter GPU computing. NVIDIA AI Enterprise 5.0 and cuLitho with TSMC and Synopsys accelerated enterprise app development and semiconductor manufacturing. Collaborations with AWS, Google Cloud, Microsoft, Oracle, and Johnson & Johnson MedTech expanded AI innovation in surgery and supercomputing efficiency.
Gaming revenue was $2.6 billion in the first quarter, down 8 percent from the previous quarter and up 18 percent from a year ago.
Initiatives:
At GDC, Nvidia introduced new AI gaming technologies for NVIDIA ACE and Neural Graphics and unveiled AI performance optimizations for Windows, enhancing NVIDIA GeForce RTX AI PCs and workstations. They announced blockbuster games incorporating RTX technology, like Star Wars Outlaws and Black Myth Wukong, and added support for models like Google's Gemma for ChatRTX.
Professional Visualisation's first-quarter revenue was $427 million, down 8% from the previous quarter and up 45% from a year ago
Initiatives:
NVIDIA introduced RTX™ 500 and 1000 Ada generation laptop GPUs and RTX A400 and A1000 desktop GPUs to enhance AI workflows in design and productivity. It also launched Omniverse™ Cloud APIs for industrial digital twin tools, expanded its Siemens partnership, and launched Earth-2 APIs for high-resolution climate simulations adopted by The Weather Company and Taiwan's Central Weather Administration.
First-quarter Automotive revenue was $329 million, up 17% from the previous quarter and up 11% from a year ago.
Initiatives:
Nvidia announced that BYD, XPENG, GAC’s AION Hyper, Nuro, and others will use its next-gen DRIVE Thor platform with Blackwell GPU architecture for their electric vehicles. U.S. and Chinese EV makers Lucid and IM Motors are adopting the DRIVE Orin platform for European models. Nvidia is also transforming in-vehicle experiences with generative AI technologies and introduced Project GR00T for humanoid robots along with major updates to the Isaac robotics platform.
PEER REVIEW
Market Capitalization and Enterprise Value
The market capitalizations of NVIDIA Corporation, Taiwan Semiconductor Manufacturing Company Limited (TSM), and Broadcom Inc highlight their significant influence in the semiconductor industry. NVIDIA leads with an impressive market capital of $2.90 trillion, dwarfing TSM's $766.28 billion and Broadcom's $732.45 billion. The enterprise values further emphasise their market positions, with NVIDIA at $2.88 trillion, TSM at $734.86 billion, and Broadcom at $796.65 billion.
Annual Return and Dividend Strategy
Examining the one-year return on these stocks provides insight into investor confidence and market performance. NVIDIA has seen a remarkable return of 150.58%, reflecting its strong market presence and innovative edge. TSM and Broadcom also performed well, with returns of 63.61% and 77.64%, respectively. All three companies maintain a quarterly dividend frequency, demonstrating their commitment to returning value to shareholders. However, their payout ratios vary significantly, with NVIDIA at 0.89%, TSM at 3.85%, and Broadcom at a notable 46.73%.
Revenue Growth and EBITDA
LABELS | NVDA | TSM | B. Inc. |
Revenue Growth | 208 | 9 | 22 |
EBITDA | 49 | 50 | 21 |
Return(YOY) | 151 | 64 | 78 |
NVIDIA's revenue growth year-over-year (YoY) is a standout at 208.27%, indicating robust demand for its products and strategic growth initiatives. In comparison, TSM's revenue growth is 9.44%, and Broadcom's is 21.62%, showing steady but less dramatic increases. In terms of EBITDA, TSM leads slightly with $50.47 billion, followed by NVIDIA at $49.27 billion and Broadcom at $21.29 billion, underscoring their operational efficiencies and profitability.
Revenue Per Share
Revenue per share is a crucial metric for evaluating financial health and efficiency. Broadcom excels here with $9.79 per share, significantly higher than NVIDIA's $3.23 and TSMC's $2.89. This suggests Broadcom's effective revenue generation relative to its outstanding shares.
Nvidia: The One thing that is not like the Others
Nvidia is often grouped with other tech giants and is labelled to be among the magnificent 7.
But does the notion of Magnificent 7 still hold? Or did it even exist in the first place?
“Magnificent 7” consists of Apple, Microsoft, Alphabet, Amazon, Meta Platforms, NVIDIA, and Tesla. Within the gang of these big tech giants, each giant has their niche. For once, Amazon is an online retailer and Tesla makes electric vehicles. Grouping them and denoting them with a homogenized term of being the “magnificent 7” is far from a stretch.
The 7 do not just differ on what they specialize in. If we look at how their stocks are performing, we can see how one thing is not like the others (literally). While some giants are underperforming, NVIDIA is one of the 7 who’s hard carrying some of the other 7 and the S&P 500. Well, in the case of the S&P 500, the magnificent 7 has stopped chasing the pack. 3 of the 7 giants are not even on the list anymore. The share prices of Alphabet and Apple have underperformed, while that of Tesla has fallen outright. The remaining four have beaten the index but by wildly differing amounts. Whereas Microsoft has done only slightly better than the average S&P 500 member, Nvidia’s shares have rocketed by an astonishing 129%.
NVIDIA seems to be the “white sheep” of the family now more than ever. And the pace at which it’s growing will not likely slow down. With the nascent of generative AI on its side, it’s hard to picture it stumbling along its course in the near future.
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