NVIDIA Corporation is an American semiconductor company that specializes in manufacturing high-end graphics processing units (GPUs). It holds approximately 80% of the global market share in GPU semiconductor chips as of 2024. Unlike general-purpose central processing unit (CPU) semiconductor chips, GPUs are built to speed up graphics-intensive applications such as video games, editing, and 3D rendering as well as artificial intelligence (AI) and machine learning (ML) applications.
Jensen Huang co-founded NVIDIA Corporation in1993 with Chris Malachowsky and Curtis Priem and became the CEO and president. He owns 3.6% of NVIDIA’s stock, which went public in 1999. Huang has been at the forefront of GPU technology for over 25 years and is one of its early pioneers.
Under Huang’s leadership, NVIDIA has become a leading supplier of both AI hardware and software . In 2022, OpenAI’s ChatGPT generative AI chatbot became available to the general public. OpenAI developed its technology using a supercomputer powered by 10,000 NVIDIA GPUs.
According to NVIDIA’s financial reports, in the third quarter of the latest fiscal year, NVIDIA reported a record revenue of $18.12 billion, which is up 34% from the previous quarter and up 206% from a year ago. The company’s data center revenue was also at a record high of $14.51 billion, up 41% from the previous quarter and up 279% from a year ago.
Shares of NVIDIA delivered gravity-defying returns in 2023, soaring 240% to deliver 10x the returns of the S&P 500 Index ($SPX) on the year. In the process, NVIDIA became the first semiconductor designer company to join the ranks of trillion-dollar companies amid the artificial intelligence (AI) boom.
What Risks Does NVIDA Face?
A possible plateau in demand for AI chips beyond a couple of years is a potent risk for NVIDIA, and so is the launch of AI chips from competitors.
Rising U.S.-China tensions are also an important and immediate risk for NVIDIA.
In terms of valuation, while Nvidia’s next 12-month price-to-earnings multiple of 28.7 looks mouthwatering – especially considering the expected revenue and profit growth over the next year – the outlook beyond 2025 is somewhat hazy although NVIDIA sits in the sweet spot of the Global AI boom, which is only just getting started.
