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Tag: nvidia earnings

  • Nvidia is ‘priced ahead of the curve,’ says Ark Invest CEO Cathie Wood

    Nvidia is ‘priced ahead of the curve,’ says Ark Invest CEO Cathie Wood

    Tech investor Cathie Wood says she’s hesitating to embrace A.I. darling Nvidia because the company’s shares are now too expensive.

    The chipmaker “is priced ahead of the curve,” the ARK Invest CEO wrote on Twitter on Monday, suggesting the stock is too overvalued for it to be a good investment.

    Wood’s ARK Innovation ETF cut its shares in Nvidia in mid-January. The chipmaker’s shares are up 172% for the year thus far.

    Nvidia experienced the third-largest single-day jump in market value on Thursday after the company predicted $11 billion in sales for the current quarter, far higher than analyst expectations. The chipmaker now has a market capitalization of $960 billion, behind just four other U.S. companies. 

    Nvidia’s rosy guidance also lifted the entire sector, with A.I.-affiliated stocks gaining $300 billion in value on Thursday. 

    The rally in A.I.-affiliated tech companies is leading some observers to worry about a bubble. Economist David Rosenberg said that the boom looked “very weird” in a Thursday interview on CNBC, and said there was “no question we have a price bubble.”

    Yet, unlike in previous bubbles when “we were getting tremendous valuations from companies that had no earnings,” Nvidia is a real, good company,” said Wharton professor Jeremy Siegel in a Monday CNBC interview. The boom in tech stocks “is not a bubble yet,” he said. 

    Nvidia shares are up by over 3% in pre-market trading on Tuesday, breaching $400 a share.

    Boom and bust

    Wood may also be concerned about the boom-and-bust nature of the chip sector. On Friday, the tech investor said she was worried about “shortages” in an interview with Bloomberg. “I begin to think about the cyclicality of a group,” she said.

    Chip companies are suffering from a slump, as the sector corrects from the chip shortages in 2020 and 2021. Consumers are buying fewer PCs, smartphones and other consumer electronics, suppressing demand for the chips that power them. Manufacturers and retailers are also selling off excess inventory stockpiled during the chip shortage. 

    Nvidia, too, is still feeling the effects of the chip slump, reporting a 38% year-on-year decline in quarterly revenue from its gaming division. 

    Yet the company clearly now sees A.I. as its future, with CEO Jensen Huang announcing a swathe of new A.I. services, products and partnerships on Monday, including a new supercomputer platform to help large tech companies create the next viral A.I. sensation, like ChatGPT.

    Tesla

    On Monday, Wood called herself an early believer in Nvidia. “In 2014, most investors considered Nvidia, priced at ~$5, simply a PC gaming chip stock. Ark Invest’s first principles research pointed to Nvidia as the premier equity play on A.I.,” she tweeted. 

    But Wood said that investors are wrong to think that Nvidia is “the only A.I. play.” Electric carmaker Tesla “is the most obvious beneficiary of the recent breakthrough in A.I.”, she tweeted on Monday, due to its investments in automated driving. 

    Wood called Tesla “the biggest A.I. play out there” in a conversation with Fortune editor-in-chief Alyson Shontell at the MPW Next Gen Summit in May. Tesla could be in the “pole position” to grab “the lion’s share” of the autonomous taxi market, at least in the U.S., the investor predicted, estimating that robotaxi platforms could be worth $8-10 trillion globally. 

    Tesla CEO Elon Musk believes the company will roll out full self-driving this year, and will help to drive its profits. Yet the company had to pause installations of its beta “Full Self-Driving” software earlier this year, after the National Highway Traffic Safety Administration deemed it a “crash risk” and asked for a safety recall. 

    Customers using Tesla’s existing automated driving services have reported thousands of instances of braking problems and abrupt acceleration, according to a set of complaints, covering a period between 2015 and March 2022, leaked to German outlet Handelsblatt before the weekend. 

    Nicholas Gordon

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  • Nvidia CEO praises ‘through the roof’ use of firm’s A.I. services—and investors seem to agree

    Nvidia CEO praises ‘through the roof’ use of firm’s A.I. services—and investors seem to agree

    Nvidia shares jumped in after-hours trading Wednesday, as the chipmaker beat expectations on revenue and said it was benefitting from a growing boom inA.I. technology driven by chatbots like OpenAI’s ChatGPT.

    The U.S.-based chip company’s revenues fell, as it reported $6.1 billion in revenue in the most recent quarter, a 21% fall from what it reported a year ago. (That revenue, at $7.6 billion, was a record for the chipmaker.) The company’s net income was $1.5 billion, a 52% year-on-year decline.

    Yet Nvidia shares surged 8.9% in after-hours trading after Nvidia CEO Jensen Huang was bullish on the company’s prospects for A.I. technology, which Huang said was at an “inflection point.” On a call with analysts, Nvidia’s CEO said that activity around its A.I. services—driven by the viral success of chatbots like ChatGPT—had “just gone through the roof” in the past several months. 

    The chip company announced that it would partner with cloud providers to offer access to Nvidia’s A.I. services to enterprise customers. Huang said enterprises now have “a sense of urgency…to develop and deploy A.I. strategies,” yet suggested that companies faced “an insurmountable obstacle” in getting access to infrastructure, algorithms and techniques for A.I.

    A.I. requires a lot of computing power, which can get expensive for even large enterprises, let alone startups. John Hennessey, the chairman of Google parent Alphabet, suggested to Reuters that an A.I.-powered search request using Google’s Bard A.I. currently costs 10 times more than a standard keyword search.

    Nvidia’s dominance in the A.I. chip market has put the company in the U.S.’s regulatory crosshairs as Washington tries to limit the sale of advanced semiconductors to Chinese companies. The company later designed a constrained version of its A.I. chip for the Chinese market to comply with U.S. restrictions. 

    Gaming slump

    The boom in A.I. technology could help to offset a slumping part of the business: video games. Nvidia makes graphics processors (GPUs), which help produce the computer graphics used in today’s video games. Nvidia’s gaming revenue fell by 46% year-on-year in the most recent quarter to reach $1.83 billion. (In contrast, data center revenue, which includes much of Nvidia’s A.I. business, rose by 11% over the same period.) 

    Gaming sales boomed during the pandemic as stuck-at-home consumers turned to digital entertainment. But inflation and people returning to work have led to slumping sales of PCs, smartphones and video game devices, such as Nintendo’s Switch, the only video game device to use an Nvidia chip.

    “Gaming is recovering from the post-pandemic downturn,” Huang said on Wednesday as part of the company’s earnings report, noting strong demand for the company’s newest GPUs. 

    Competing chip company AMD reported a smaller decline in gaming revenue in its most recent quarter, with $1.6 billion in gaming sales, down 6% year-on-year. Both Microsoft and Sony use AMD chips for their video game consoles. 

    On Tuesday, Nvidia announced that it would be bringing Microsoft-published games to the company’s GeForce Now service, which allows users to stream graphically-intensive games hosted on an Nvidia server. Microsoft is agreeing to offer its games on more platforms to mollify regulators concerned about its pending acquisition of Activision Blizzard.

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    Nicholas Gordon

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