Nvidia is tying its future to AI at just the right time

Shares of the graphics chip maker Nvidia (NVDA) rose more than 14% Thursday, despite the fact that the company reported a 21% year-over-year revenue decline for its fourth quarter on Wednesday. The reason? A.I.

Specifically, the hype surrounding A.I. applications like ChatGPT, Microsoft’s Bing, and Google’s Bard, all of which require heavy-duty processing power that Nvidia’s chips are more than well suited for.

Nvidia CEO Jensen Huang told analysts on the company’s earnings call that the graphics giant is at an “inflection point,” and said that A.I. technologies and its ilk, are akin to the iPhone in technological importance.

“ChatGPT reached 150 million people in 60, 90 days. I mean, this is quite an extraordinary thing,” Huang said. “And people are using it to create all kinds of things. And so I think that what you’re seeing now is just a torrent of new companies and new applications that are emerging.”

It’s not just Nvidia’s hardware capabilities, either, though its high-powered H100 platform is already shipping to cloud-service providers. The company also announced it will begin offering a cloud-based A.I. as-a-service option that will let smaller companies take advantage of Nvidia’s processing power for training A.I. models including the kind that underpin ChatGPT.

But it’s about more than just the likes of ChatGPT, Arete Research Co-founder Brett Simpson told Yahoo Finance Live.

“Ultimately, the [computing] intensity of A.I. is far greater than conventional computing. So I think the revenue that’s associated with A.I. will be directly proportional to the computing opportunity here we see long term,” Simpson said. “The promise of this technology goes way beyond a chatbot so to speak.”

Jensen Huang, CEO of Nvidia, reacts to a video at his keynote address at CES in Las Vegas, Nevada, U.S. January 7, 2018. REUTERS/Rick Wilking

And Nvidia isn’t new to the A.I. market. The company has been investing in its data center business for years, and it’s clearly paying off, with revenue exploding over the past few years.

Data center business revenue jumped from $968 million in Q4 2019 to $3.62 billion in the latest quarter. And despite a broader slowdown in chip and cloud computing sales in the industry, Nvidia’s data center revenue jumped 11% year-over-year.

And as interest in more advanced A.I. systems become mainstream, Nvidia stands to benefit handsomely.

Of course, it’s difficult to discount Nvidia’s gaming business as well. While the company reported a 46% year-over-year decline in the segment, it reported a 16% quarter-over-quarter increase in revenue. The gaming business is working its way through difficult comparisons to the pandemic era when consumers were spending their cash on new high-end graphics cards and gaming PCs. As we begin to lap those dates, however, the gaming picture will likely improve for the company.

For now though, Nvidia’s future is tied directly to A.I.

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