(Bloomberg) — Nvidia Corp. gave investors what they were looking for this week: hard evidence that the rise of artificial intelligence is translating into increased sales. Almost lost in the euphoria the chipmaker unleashed, however, was a warning that not everyone would join the party.
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Jensen Huang, CEO of Nvidia, described what he sees as a shift underway in the world’s data centers as companies rushing to add artificial intelligence computing power shift their spending to data centers around the world. equipment manufactured by Nvidia and far from Intel Corp. most profitable source of revenue, data center processors.
“You see the start of, call it, a 10-year transition to basically recycle or reclaim the world’s data centers and build them as accelerated computing,” he said on the call to the public on Wednesday. results. “The workload will be mostly generative AI.”
While Huang didn’t mention any names, there was no doubt who he was talking about. He said data centers would shift from relying on central processors, a business dominated by Intel, to using more graphics chips, Nvidia’s domain.
Intel shares fell 5.5% on Thursday, dealing another blow to the company which, just two years ago, was the world’s largest chipmaker. Nvidia has soared 160% this year, putting $1 trillion in market value within reach, while Intel is barely positive. An index of chipmakers gained 32%.
“They missed the mark, which affected stock performance, valuation and growth potential,” Zeno Mercer, senior research analyst at ROBO Global, said of Intel. The company “should have done a little more to be there. However, it is short-sighted to nullify anyone’s potential for growth and market share in a market like AI. The company counts Nvidia as its second largest holding.
Investors took a more constructive view of Advanced Micro Devices Inc., which, like Intel, derives the majority of sales from central processing units. The stock rebounded 11% on Thursday, adding to gains that have pushed its shares up 86% this year. AMD’s work with some of the biggest buyers of this kind of technology could put it in a better position to catch up with Nvidia.
Read more: Cathie Wood’s ARKK dumped Nvidia shares ahead of $560 billion rise
That doesn’t mean it’s a cheap way for investors to join the Nvidia-led rally. AMD is priced at 37 times projected earnings over the next 12 months, according to data compiled by Bloomberg. That’s approaching Nvidia’s levels, which trades at 50x.
Nvidia dominates the market for graphics chips that gamers use to get a more realistic experience on their personal computers, and has adapted the key attribute of this type of chip – parallel processing – for increasing use in training and running games. AI software.
Intel has tried for many years to enter this market with limited success. AMD is the second-largest maker of graphics processing units for gamers and has just started offering products optimized for data center computing, which could make it valuable to large customers such as Microsoft Corp. who are currently lining up for Nvidia’s offerings.
While Intel and other chipmakers such as Qualcomm Inc. have talked about their ambitions in dealing with AI and detailed new products they believe will impact the market, investors haven’t told them. not heard.
“The fact that they haven’t made any moves in this space is really to their detriment,” said Adam Sarhan, managing director of 50 Park Investments. “By the time they jump on the bandwagon they may be too late, and if they don’t they could be left behind. AI is taking the world by storm, with applications we never expected, and it could impact all areas of the chip space.
Technical table of the day
Nvidia’s surge this year helped fuel a strong rally in the Philadelphia Stock Exchange’s semiconductor index, which closed Thursday at its highest level since April 2022. The index jumped 6, 8% following Nvidia’s forecast, its biggest gain since November, taking its 2023 gain to 32%. While Nvidia is the biggest gainer among the index components, Advanced Micro Devices has also outperformed this year, up 86%.
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Marvell Technology Inc. jumped 17% in premarket trading after the chipmaker said it expects artificial intelligence revenue to soar this year, capitalizing on a spending boom which also sent Nvidia on a record rally this week.
Citigroup Inc. strategists raised US stocks to neutral and tech stocks to overweight on the expected boost from artificial intelligence, the expected end to Federal Reserve rate hikes and US economic growth resilient to China and Europe.
Nasdaq Inc. may be the coveted destination for tech companies looking to go public. But the exchange had to pull out all the stops to lure chip designer Arm Ltd., likely to be the biggest initial public offering of the year.
Neuralink Corp., Elon Musk’s brain implant company, said it has received approval from the US Food and Drug Administration to conduct human clinical trials.
Alibaba Group Holding Ltd. said it plans to hire 15,000 people this year, pushing back against reports that the Chinese tech company is laying off employees.
Global investors at the world’s largest venture capital firms, including Accel and Sequoia Capital India, are asking their portfolio companies the same question: how vulnerable are you to artificial intelligence?
National Amusements Inc., the Redstone family holding company that controls media giant Paramount Global, has raised $125 million from an investment firm co-founded by IT billionaire Michael Dell to pay off its debt.
Workday Inc. rose in extended trading after lifting its subscription revenue forecast, easing anxiety over corporate appetite for software spending. The company manufactures software for business tasks such as human resource management.
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