Source: Zhitong Finance Author: Rousseau
Nvidia, the leader of AI chips and named “the most important stock on the planet” by Goldman Sachs, once again announced unparalleled results that shocked global investors.
After the US stock market on Wednesday, the AI chip hegemon was named “the most important stock on Earth” by Goldman Sachs$NVIDIA (NVDA.US)$Once again, it announced unparalleled results that shocked global investors, which can be described as dispelling people's concerns about the slowdown in AI related corporate spending. Nvidia has once again comprehensively strengthened the “AI faith” of technology stock investors on its own. Belief in AI is now once again making huge waves in global stock markets, particularly boosting chip stocks such as TSMC, AMD, Samsung Electronics, and SK Hynix.
Nvidia's extremely strong quarterly earnings report up to April 2024 gave stock market traders the green light. They are betting that there is room for continued gains in chip stocks linked to basic AI hardware, not to mention Nvidia's own stock — Nvidia, which once rose above 7% in post-market trading of US stocks after the results were announced. Currently, the stock price has broken through the important mark of $1,000.
Furthermore, Nvidia announced a major 10-1 stock split and a drastic increase in dividends. These measures will further boost its share price increase. Nvidia said in its earnings report that the move was aimed at making it easier for employees and investors to buy stocks. This will be Nvidia's second spin-off in the past three years. Since announcing the last stock split in May 2021, the company's stock price has risen by an astonishing 500%.
Of course, the stock split had no fundamental impact on the value of the stock itself, but after the split plan was carried out, the price of the underlying stock dropped significantly, which meant that stocks with excellent fundamentals could attract more investors to participate in the transaction. Previously, these investors were often hesitant because the stock price was too high.
Alec Young, chief investment strategist at Mapsignals, said that this move often helps to push retail investors to make big purchases. In an interview, Young said, “Nvidia's announcement of a stock split is big news. You should not underestimate the enthusiasm of retail investors to buy popular technology stocks.”
The after-hours rise in Nvidia's stock price saw its share price break above $1,000 for the first time. If US stocks continue to rise after opening on Thursday, the AI chip leader will increase its market capitalization by more than $100 billion and increase its share price by more than 100% in 2024.
Michael Sansoterra, chief investment officer of Silvant Capital Management, said after Nvidia's results announced that Nvidia's results suggest that the rise in artificial intelligence-related stocks will continue. “This not only shows that tech companies are spending strongly on artificial intelligence, but also that a wider range of companies are also buying Nvidia AI GPUs to deploy artificial intelligence.” “This bodes very well for the healthy development of the artificial intelligence market, which is still in its early stages.”
After Nvidia's earnings report was announced, global chip stocks surged
Nvidia's core suppliers are concentrated in Asia, and this unrivaled performance also helped Asian chip stocks collectively rise on Thursday. In the Korean stock market, the stock price of the Korean chip giant SK Hynix Inc. (SK Hynix Inc.), which provides HBM storage systems for Nvidia H100/H200 and the upcoming Blackwell series AI GPUs, rose 3.2% on Thursday; as the only foundry for AI chips, the global AI chip leader Nvidia and AMD, and the only foundry for AI chips developed in-house by cloud giants such as Microsoft and Amazon, the stock price of TSMC rose more than 1.5% to a record high; in the Japanese stock market, memory chip testing for AI tasks Equipment supplier Edwin Test's stock price soared by more than 5%. Judging from the benchmark index, the Bloomberg Asia Pacific Semiconductor Index hit its highest level in more than three years on Thursday.
In US stocks, Nvidia's performance drove chip stocks to rise sharply in after-market trading of US stocks. Among them, Nvidia's biggest competitor in the AI GPU field, AMD (AMD.US) and HBM3E system supplier Micron (MU.US) rose more than 3% after the market. Broadcom (AVGO.US), an important AI infrastructure provider, data center chip leader Maywell Technology (MRVL.US), and semiconductor equipment giants such as Applied Materials (AMAT.US), Fanlin Group (LRCX.US), and KLAC.US (KLAC.US) all had post-market gains of 2%-3%. Additionally, AI server manufacturers Ultra Micro Computer (SMCI.US) and Dell Technologies (DELL.US), which are closely linked to Nvidia's AI GPUs, both rose more than 4% after the market.
As the global corporate layout of generative AI becomes more intense, demand for infrastructure closely related to the AI field — that is, AI chips, servers, and many chip products, including AI chips, servers, end side CPUs, FPGAs, Ethernet switching chips, electric vehicle MCUs, etc., is expected to increase dramatically, and a new upward cycle of chip stocks may soon set sail.
The “Philadelphia Semiconductor Index,” which can be called the benchmark index for global chip stocks, can be described as being in a “sideways fluctuation” since March 2023 due to multiple adverse factors such as concerns about slowing AI spending and cooling expectations of the Federal Reserve's interest rate cuts. Now, with another strong earnings report from Nvidia, the “Philadelphia Semiconductor Index” is expected to begin a new round of “upward carnival.”
Nvidia's results have “exploded” for several consecutive quarters! Wong In-hoon shouts: The next industrial revolution has begun
Overall, Nvidia's latest performance far exceeded market expectations. Total revenue and data center business revenue both reached new highs, and the revenue outlook for the next fiscal quarter also far exceeded market expectations. At the same time, it announced a stock split and a significant increase in dividends.
Nvidia's total Q1 revenue increased 262% year over year to 26 billion US dollars, far exceeding the market's general forecast of 24.5 billion US dollars. Total revenue hit a record high, and total revenue growth rate was Nvidia's third consecutive quarter with a year-on-year growth rate of more than 200%. In terms of performance expectations, Nvidia expects second-quarter revenue to reach around 28 billion US dollars, far exceeding market expectations of 26.8 billion US dollars.
Nvidia's data center business division, which provides AI GPUs such as H100/H200 to data centers around the world, can once be described as Nvidia's “side business” (the gaming business has always been Nvidia's most important business since Nvidia was founded), and has been the strongest contributor to the tech giant's overall revenue for many consecutive quarters. Nvidia's Q1 data center revenue increased 427% year over year to a record high of US$22.6 billion, with market expectations of US$22.1 billion.
Strong performance and prospects highlight Nvidia's ranking as the best beneficiary of the AI craze for global corporate layout, and can be called the “strongest seller” in the AI field. Facing a surge in consumer demand for generative artificial intelligence products such as ChatGPT and Google Gemini, and increasingly important AI support tools such as AI software for other enterprises, data center operators from all over the world are making every effort to reserve the company's AI GPUs. These processors are extremely good at handling the heavy workloads required for artificial intelligence. Nvidia AI GPUs, which have a large number of computing cores, can execute multiple high-intensity AI tasks at the same time, and are extremely good at processing heavy-level parallel computing models and high-computational density matrix operations, have become the core hardware in the chip field in recent years.
Nvidia has been deeply involved in the field of global high-performance computing for many years. In particular, the CUDA computing platform built by itself is popular all over the world. It can be described as the preferred software and hardware collaboration system in high-performance computing fields such as AI training/inference. Nvidia's most popular AI chip H100 GPU accelerator is based on Nvidia's groundbreaking Hopper GPU architecture and provides unprecedented computing power, especially in terms of floating point computation, tensor core performance, and AI-specific acceleration. Tesla CEO Musk compared technology companies' artificial intelligence arms race to a high-risk “poker game,” that is, companies need to invest billions of dollars in artificial intelligence hardware every year to maintain competitiveness.
Goldman Sachs anticipates that four major technology companies, Microsoft, Google, Amazon's AWS, and Facebook parent company Meta, will invest as much as 177 billion US dollars this year, up from 119 billion US dollars last year, and will continue to increase to an astonishing 195 billion US dollars in 2025; Goldman Sachs also expects that the vast majority of these giants' cloud computing expenses will be used to purchase Nvidia's newly released Blackwell series AI GPUs.
After Nvidia announced the results, Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, said: “We are in the midst of a technological revolution, and we are still in the early stages.” “It's really hard not to be optimistic right now, especially with Nvidia.”
Nvidia founder and CEO Wong In-hoon emphasized during the performance conference call: “The next industrial revolution has begun.” “Artificial intelligence (AI) will bring significant productivity improvements to almost all industries, and help companies increase cost and energy efficiency while expanding revenue opportunities for all.”
Hwang In-hoon also said at the conference that Nvidia wants to sell its AI technology to a wider range of markets, not just large cloud computing vendors. Hwang In-hoon said that artificial intelligence is being transferred to a wider range of customers such as consumer internet companies, automobile manufacturers, and healthcare, and governments are also actively developing their own artificial intelligence systems. In addition to cloud service providers, these opportunities are “creating multiple multi-billion dollar vertical markets,” he said.
The big wave of AI has swept through, and the chip industry chain is entering a new boom cycle
When the server AI chip deployment scale that processes parallel computing reaches the most basic computing power requirements and basic performance support, according to technological trends, in consumer electronics application terminals, including smart phones and humanoid robots, as well as application terminals such as electric vehicle software systems and industrial production, AI models will eventually be integrated into these terminals, that is, end-side AI.
Compared to cloud AI, end-side AI, which has significant advantages such as high efficiency, fast response, and personalization, is more in line with the actual needs of consumers, which will inevitably lead to a surge in demand for inference chips. Compared to AI training, the AI inference field requires far less parallel GPU computing power in the context of “massive data bombing” applications. The inference process involves applying trained models to make decisions or recognition. CPU-centered central processors that are extremely good at complex logic processing tasks and control flow tasks are sufficient to efficiently schedule and process many inference scenarios.
According to the technical line of major chip manufacturers, AI chips for applications such as PCs, smartphones, and smartwatches will use the CPU as the core and integrate NPU and GPU technology. This means that demand for consumer electronics chip replacement will soon relay the demand for data center server chips and usher in an explosion of demand. Allied Market Research predicts that judging from the chip type, the CPU-centered application terminal AI chip segment will account for the majority of the global AI chip market.
As a result, as the big end-side AI model merges into everything, it means that demand not only for AI infrastructure — that is, AI chips in data centers — is surging, but demand for upgrading chips such as CPU-centered central processors, memory chips, MCUs covering electric vehicles, and analog chips covering the industrial sector is expected to usher in a wave of surge from 2024 onwards.
Nomura, the world's top financial institution, recently released a report saying that as cyclical technology recovery expands to other consumer electronics terminal markets, it will support the entire chip industry to enter the next round of boom, which is expected to continue fully from the second half of this year to 2025. Nomura expects global chip sales to show a strong growth trend in the next few months. Driven by demand for AI chips, the cyclical recovery in the terminal chip market will expand from artificial intelligence servers to traditional servers, PCs, and smartphone core CPU chips, and other major computing fields of electric vehicle MCUs.
This wave of chip industry recovery, led by AI chips, can be described as increasingly clear. According to data recently released by the American Semiconductor Industry Association (SIA), global semiconductor sales for the first quarter of 2024 totaled US$137.7 billion, a significant increase of 15.2% over the first quarter of 2023. Regarding the semiconductor industry's sales forecast for 2024, SIA President and CEO John Neuffer said in the data report that overall sales in 2024 will increase by double digits compared to 2023.
TECHCET recently released a major forecast report. It is expected that continued strong demand for AI chips in 2024 will lead the global semiconductor market into a new upward cycle. TECHCET predicts that sales in the semiconductor industry are expected to increase sharply by 12% in 2024, followed by a sharp increase of 21% in 2025, stimulated by demand for AI chips and a wider range of chips. TECHCET predicts that the global semiconductor market is expected to break the trillion dollar mark in 2031 or 2032.
Wall Street firm Goldman Sachs believes that the AI investment boom, the “stock driving fuel” of the global stock market, is far from being exhausted. The agency said in the latest forecast report released recently that the global stock market is currently only in the first phase of the investment boom led by artificial intelligence. This boom will continue to expand to the second, third, and fourth stages, boosting more and more industries around the world.
“If Nvidia represents the first phase of the AI stock trading boom — the AI server chip phase that benefits most directly, then the second phase will be for companies around the world other than Nvidia to help build infrastructure related to artificial intelligence.” Goldman Sachs wrote. “The third phase is expected to be for companies incorporating artificial intelligence into their products to increase the scale of revenue, while the fourth phase is an overall increase in production efficiency related to artificial intelligence, and this expectation can be realized in many companies around the world.”
In the second phase of the AI investment boom, the focus is on companies involved in AI infrastructure construction other than Nvidia, which mainly include chip manufacturers such as TSMC, semiconductor equipment vendors, and chip companies focusing on end-side AI applications. The second phase of the AI investment boom mentioned by Goldman Sachs includes semiconductor equipment providers such as Asmack and applied materials, chip manufacturers, cloud service providers, data center REITs, data center hardware and chip equipment companies other than Nvidia, software security stocks, and utility companies.
Wall Street price targets compiled by Tipranks show that Wall Street investment institutions are generally optimistic about the future stock price trend of Nvidia, the AI chip hegemon. The average target price reflecting consistent expectations is even as high as $1104.62, while the consistent rating is a “strong buy”, which means that there is at least 16% potential upside over the next 12 months, and the highest target price is even as high as $1,400. Rosenblatt, a well-known investment agency, is steadfastly bullish on Nvidia, maintaining a strong bullish price of $1,400. Wells Fargo recently raised Nvidia's target price, saying that its data center business may continue to grow significantly. The bank raised Nvidia's target price sharply from $970 to $1,150.
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