In recent months, the shares of Nvidia had a volatile movement. Due to the AI boom, the stock has given returns of around 186% in the past year. The stock has recovered from the recent lows of $102.83 in September. The stock touched an all-time high of $140.76 in June. With a Market Capitalisation of $ 3.23 trillion, it is set to dethrone Apple which has $3.55 trillion. Recently, the company has crossed Microsoft to become 2nd largest company by market capitalization in the world.
The company’s share began to rise after OpenAI announced a $6.6 billion fundraising for OpenAI-owned ChatGPT. This has triggered the stock to move as most of the demand to run LLMs and their growth requires AI chips. Most of the funding can be redirected towards Nvidia due to expected spending on AI chips.
The stock in recent days was down due to the results which disappointed investors. The company was growing at breakneck speed from 2022 after increased investment and interest in AI. The recent quarterly results show revenues of $30.04 billion which is an increase of 15.34% QoQ and 122.40% YoY. The EPS saw an increase from $0.25/share to $0.68/share for the same quarter.
The trigger for the sharp fall in late August was after Nvidia didn’t meet analyst expectations as much as investors had hoped. They dropped further following a Bloomberg report about the US Department of Justice subpoenaing the company in early September, which Nvidia denied.
Concerns about reduced demand from China arose due to rising trade tensions with the US contributed to the decline. Recently, Foxconn shared details about a mega factory it is building in Mexico to assemble Nvidia servers using its Grace Blackwell chips which reduces Nvidia’s reliance on China amid rising trade tensions.
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However, recent positive news in the semiconductor sector could help Nvidia rebound. TSMC, one of Nvidia’s chip manufacturers, reported sales that exceeded Wall Street’s expectations, which indicates strong demand for AI in the near term.
Nvidia’s management remains optimistic about the AI trend. CEO Jensen Huang stated last week in an interview that demand for Nvidia’s latest Blackwell chips has been “insane.”
Young Liu, the chair of Nvidia’s server manufacturer Foxconn, told Bloomberg Television that the company is increasing its capacity to meet the “crazy” demand for Nvidia’s AI chips, or GPUs.
Apple, Nvidia, and Microsoft make up about a fifth of the S&P 500’s weight, which gives them significant influence over the index’s daily gains and losses.
The company earned around $13.51 billion from graphics which is a 13.52% increase YoY, and $47.40 billion from Compute and Networking which saw an increase of 214% YoY as per the 2024 financial year. This substantial increase has resulted in breakneck speed growth for Nvidia as it reflects on its share price.
Nvidia’s spending on research and development in FY24 compared to its revenue stood around 14.23%. Analysts expect that spending on AI data center construction will more than double Nvidia’s annual revenue to nearly $126 billion, according to LSEG data.
Written by Santhosh
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