Nvidia Nears $2 Trillion Value, As AI Boosts Profits, Sales

Nvidia continues to reap the financial rewards from its position in the artificial intelligence (AI) chip sector, with blowout fourth quarter and year-end results.

The GPU powerhouse announced its fourth quarter and FY24 results that once again exceeded Wall Street’s already high expectations – all of which has helped push the firm’s market value (market capitalisation) close to the $2 trillion mark.

Earlier this month Nvidia’s share price increase had already driven its market value above that of Amazon and even Google parent Alphabet.

Financial performance

For context, in less than an year, Nvidia’s share price has almost doubled, after it surpassed the $1 trillion mark in May 2023.

For the fourth quarter ended 28 January 2024, Nvidia’s net profit rose a staggering 769 percent to $12.3bn, from $1.4bn in the same year ago quarter.

Q4 revenues rose 265 percent to $22.1bn, from $6bn a year earlier.

There was equally astonishing news with the full year results, after Nvidia’s FY24 profits rose 581 percent to $29.8bn, from $4.4bn in FY23.

Likewise FY24 revenue rose 126 percent to $60.9 billion, from $27bn in FY23.

“Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries and nations,” said Jensen Huang, founder and CEO of Nvidia.

“Our Data Center platform is powered by increasingly diverse drivers – demand for data processing, training and inference from large cloud-service providers and GPU-specialised ones, as well as from enterprise software and consumer internet companies,” said Huang. “Vertical industries – led by auto, financial services and healthcare – are now at a multibillion-dollar level.”

“Nvidia RTX, introduced less than six years ago, is now a massive PC platform for generative AI, enjoyed by 100 million gamers and creators,” Huang added. “The year ahead will bring major new product cycles with exceptional innovations to help propel our industry forward.”

AI sweet spot

Nvidia was helped by a record quarterly Data Center revenue of $18.4bn, up 409 percent from a year ago, which reflects the massive demand (and price) of its AI chips.

Earlier this month Nvidia said it will build bespoke semiconductors and chips for certain clients, as its customers including OpenAI, Microsoft, Alphabet and Meta Platforms, race to snap up the dwindling supply of Nvidia chips.

It should be remembered that Nvidia’s H100 and A100 chips serve as a generalised, all-purpose AI processor for many of those major customers.

Indeed, Nvidia controls about 80 percent of the high-end AI chip market, and its chips are used to train the huge AI models such as those developed by Microsoft and Meta.

And its AI chips are not cheap. While Nvidia does not disclose H100 prices, each chip can reportedly sell from $16,000 to $100,000 depending on the volume purchased and other factors.

Meta for example apparently plans to bring its total stock to 350,000 H100s chips in 2024, demonstrating the hefty financial investment required to compete in this sector, and the value of organisation supplying these semiconductors.

Market value

Nvidia’s share price has grown by 36 percent over the past year, and on Thursday afternoon was trading up 15 percent at $775.87.

This pushed the firm’s market valuation to $1.93 trillion.

This makes Nvidia the third most valuable company in the United States (behind Microsoft and Apple).

If Nvidia does hit the $2 trillion mark, it will have achieved the milestone at the fastest pace ever by adding $1 trillion in just about nine months.

And things don’t seem to be slowing down for Nvidia, after it forecast revenues in the current quarter to hit $24 billion, way ahead of Wall Street estimates.