Nvidia’s Meteoric Rise and the Challenges Ahead

Last week, Nvidia briefly overtook Apple to become the second most-valuable company in the world at $3.01 trillion. Even as Nvidia shareholders and its chief executive rejoiced, analysts and watchers of the company claimed the future may not be so easy.

Nvidia’s rise to the top was drastic—fuelling its sharp uptick from a mid-tier tech company to one of the biggest in the world in less than two years. At the heart of this growth is artificial intelligence (AI)—as OpenAI’s ChatGPT became popular, Nvidia’s graphics processing unit (GPU) chips, once known only among gamers, took the spotlight.

The biggest enterprises globally made a beeline for its chips, which today have a waitlist that runs into years. Nvidia’s GPU technology supremacy also allowed it to control prices, placing it at the right place at the right time to catch the biggest AI boom yet.

But, it can’t accelerate as fast as it needs to—around the world, demand for AI deployments across enterprises, data centers, and researchers has skyrocketed. This is seeing multiple brands come to the fore as rivals, while talks have already begun on reducing generative AI’s dependence on the heavy computing power of GPUs.

Intel and AMD. Intel’s history and expertise in making chips led it to announce Gaudi-3, a dedicated AI chip taking on Nvidia’s in-demand H100. The other rival is AMD’s MI300X GPU, which is ramping up output and enterprise uptake. Industry observers say even if Nvidia claims superior performance, firms are likely to prioritize availability over performance.

Yes. Nvidia’s biggest customers include Google parent Alphabet, e-commerce behemoth Amazon, social media giant Meta Platforms, and tech conglomerate Microsoft. Industry estimates peg as much as 40% of Nvidia’s sales to be accounted for one of these four. Alarmingly for Nvidia, each of these firms has invested in its own AI chip to reduce reliance on Nvidia. If this plays out, Nvidia’s power may diminish and affect its market cap.

Investment platform Fisdom estimates Indian shareholder exposure of over 400 crore to Nvidia through mutual funds—a drop in the company’s market cap and share prices can affect those that have bet on tech-driven funds. However, for Nvidia, India is a small market—less than 1% of its global revenue is generated in India. Due to India’s stature as a growing economy, Huang would want to maintain good relations. But, at this very moment, India may not be the top priority for the company.

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