The hype surrounding artificial intelligence (AI) is driving the shares in some of the world’s largest technology companies, including chip makers. Nvidia, the world’s largest maker of specialized chips needed to power a new generation of AI products, saw its shares surge by almost 4%, becoming the first chipmaker with a $1 trillion market capitalization after announcing several AI-related products over the weekend.
Tom Essaye, founder of The Sevens Report newsletter and former Merrill Lynch trader, wrote that AI has great potential and appears to be the “next big thing”. However, he added that he does not see how that promise can offset the reality of higher interest rates and more pressure on the economy, at least not for a sustainable period. Nvidia now joins Google-owner Alphabet, Amazon, Apple, and Microsoft with trillion-dollar valuations. Fewer than 10 companies globally have ever achieved this level.
Jensen Huang, the founder of Nvidia, shared the philosophy that has brought his company to this moment in a speech at the National Taiwan University over the weekend. He said, “Run, don’t walk. Either you are running for food, or you are running from becoming food.” Huang’s urgency and willingness to take risks that other rule-by-committee businesses dare not is what compelled Nvidia to make big bets on artificial intelligence years before anyone else was taking it seriously. Today, it’s proving to be the company’s golden goose.
Nvidia’s shares have soared since last week when it gave an AI-fueled sales forecast that shattered analysts’ estimates. The shares continued to gain on Tuesday after announcing several new artificial intelligence-related products over the weekend that touch on everything from robotics to gaming to advertising and networking. Huang also unveiled an AI supercomputer platform that will help tech companies create their versions of ChatGPT. “It’s too much,” Huang said during his presentation of the platform in Taiwan. “I know it’s too much.”
Not everyone is bullish on Nvidia. Cathie Wood, whose flagship ARK Innovation fund cut its holding in Nvidia in January, warned that the computer-chip industry’s boom-bust cycles pose risks. “There are a few reasons we take some pause,” she said, with competition growing among firms for a piece of the AI market. She called Nvidia a “a check-the-box stock”.
Nvidia’s success is a testament to the growing importance of AI in the technology sector. As more companies around the world bake AI into their operations, the demand for specialized chips needed to power AI products will continue to grow. Nvidia’s dominance in this area has made it a market leader and a top pick among investors. However, as competition in the AI market grows, the company will need to continue to innovate and take risks to maintain its position as a leader in the industry.
