(BFM Bourse) – The specialist in graphics cards has seen its activity driven by the rise of generative artificial intelligence, itself fueled by the emergence of the conversational robot. Which resulted in dizzying stock market performance for such a large capitalization.
One year ago today, OpenAI brought Nvidia the most important stock market catalyst in its history by creating ChatGPT, its conversational robot fueling generative artificial intelligence (AI).
The quality and speed of ChatGPT’s responses have caused real enthusiasm among users. And financial markets which have begun to see significant potential for monetization of generative AI.
OpenAI has created a breach into which many rivals have rushed. Google launched its own conversational robot Bard, and Elon Musk recently presented Grok, developed by his start-up Xai.
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For Nvidia, the rise of generative AI has resulted in a significant increase in demand for its products. The group dominates the market for graphics chips essential for generating advanced tasks and applications in artificial intelligence.
OpenAI (49% owned by Microsoft) and Google are thus equipping themselves with thousands or even tens of thousands of Nvidia A100 graphics processors (GPUs) in their data centers to develop and train their conversational robots, ChatGPT and Bard respectively. The increased use of generative AI translates into more needs for computing power, and therefore greater demand for Nvidia’s chips.
A simple glance at Nvidia’s latest financial results shows the surge in its activity. Over its entire third quarter, revenues jumped 206% year-on-year (and 34% compared to the previous quarter) to $18.12 billion. The “data center” division, which is at the forefront of the emergence of generative AI, generated a turnover of 14.51 billion dollars, an increase of 279%. Net profit increased over one year by…1,259% to $9.2 billion.
Still potential?
And even if they disappointed the most optimistic forecasts, the outlook for the fourth quarter remains colossal, since the group expects revenues of around 20 billion dollars for the last three months of the year, a multiplication of 3, 3 over a year.
And obviously this new situation for Nvidia’s activity has resulted in a dizzying stock market performance that is even difficult to imagine for a mega-capitalization. Since the launch of ChatGPT, Nvidia has seen its price jump by more than 200% (207%). To the point of now being the sixth largest market capitalization in the world with a total of 1,180 billion dollars.
It obviously remains to be seen whether the group’s rise can continue, as the stock has fallen 3% over the last three months. “While the group’s short-term momentum is clearly impressive, investor uncertainty over the sustainability of this growth is expected, in our view, to remain a persistent problem,” Deutsche Bank warned last week. Bank of America, for its part, remains optimistic, judging that the company’s divisions benefit from long-term tailwinds. The American bank has a target of $650 which gives the stock a potential of more than 35%. Moreover, the average target of analysts, compiled by investing.com, is located at these altitudes, at 653 dollars (compared to around 480 dollars currently).
Julien Marion – ©2023 BFM Bourse