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NVIDIA is an American technology company that is a colonising pioneer in the design and production of specialised computer chips – more specifically graphic processing units (GPUs) – for high-performance computing as well as chip units for mobile computing and the automotive market.
More specifically, the company is the dominant supplier of artificial intelligence hardware and software.
And now, not surprisingly, NVIDIA has overtaken Google and Amazon to become the third most valuable company on the planet. Only Microsoft and Apple are worth more at around 3 trillion dollars; NVIDIA is at 2 trillion dollars.
NVIDIA announced blockbuster results on 21 February, propelling the shares to a stratospheric rise of 16% in one day. This was an increase in shareholder wealth of $280 billion, a stock market record of all time.
Analysts for once were at a loss for words.
Quarterly revenue came in at $22.1 billion, up 22% from Q3, and up 265% from a year ago.
Data Center revenue was a record $18.4 billion, up 27% from Q3 and up 409% from a year ago.
And full-year revenue was $60.9 billion, up 126%.
If you think this is good, the forward-looking statements were even more encouraging.
‘The computer industry is going through two simultaneous transitions – accelerated computing and generative AI,’ said Jensen Huang, founder and CEO of NVIDIA.
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‘A trillion dollars of installed global Data Center infrastructure will transition from general-purpose to accelerated computing as companies race to apply generative AI into every product, service, and business process.
‘Our entire Data Center family of products is in production. We are significantly increasing our supply to meet surging demand for them,’ he said.
While NVIDIA is the dominant supplier of AI hardware and software, Microsoft is seen as having a clear lead in monetising AI and rolling it out to its clients.
Microsoft is the dominant developer of software, services, devices and solutions worldwide.
The Business Processors segment offers a host of software packages and Microsoft 365 Copilot. This segment also has LinkedIn and the Cloud-based applications.
The Intelligent Cloud segment provides server products and cloud services such as Azure, as well as other cloud services. The More Personal Computing segment offers Windows and all the related software, all the gaming businesses, Xbox hardware and content, search and news advertising, Bing, and Microsoft News and Edge.
In the interest of brevity, the above is just a condensed list of all the services and software. The offering is incredible.
Microsoft has absolutely the best management team around, delivering coup after coup and executing incredibly well.
The biggest segment is now the Intelligent Cloud. Azure is the driving force behind the cloud platform, and revenue from this division grew by 29% last quarter.
By comparison, Amazon’s web services grew by only 12% and Google Cloud, which is much smaller, grew by 22%.
Microsoft expects this segment to continue growing at this pace. Driving this performance is the growth in the Azure Arc platform, which allows customers to run apps on-premise or hybrid cloud environments. This platform saw a 140% increase in customers year-over-year last quarter.
And if that is not exciting enough, Microsoft is the clear leader in artificial intelligence (AI). Azure is the preferred platform for some of the best large language model developers. They are using this platform to create generative AI applications. Microsoft also has Open AI models and Meta Platforms Llama 2 and other open-source models on its platform.
Microsoft continues to generate vast amounts of cash–free cash flow over the last 12 months exceeded $63 billion. The balance sheet has $144 billion in cash and just $72 billion debt.
So it’s no wonder that Microsoft shares hit an all-time high this month and are set to go much higher.
It is hard to find other shares that are more compelling than Microsoft’s on a growth and risk-adjusted basis.
Now investors also have a new opportunity to consider. ARM’s IPO (Initial Public Offering) debuted on the Nasdaq on 14 September. The shares were priced at 51 dollars per share. On the first day of trading, the shares closed at 63.59 dollars for a massive rally of 25%.
ARM is one of the most important semiconductor stocks in the world. ARM designs the architecture used in about 99 percent of all smartphones and other devices – but both turnover and profitability have declined over the last 12 months. This is something that makes pricing or valuing the company so much harder. However, value is not about the past but about the future, and the future for ARM is very bright.
Some of the largest companies – AMD, Apple, Google and NVIDIA — participated in the listing, adding to the excitement.
Early this month came the announcement that ARM had extended the agreement to supply Apple with the architecture it uses extensively in the iPhone, iPad and Mac.
Another joint venture is creating further excitement. ARM is working with NVIDIA to deploy technology to run AI and ML (machine learning) workloads in billions of devices.
Don’t forget that the dark horse in the AI race is Apple. Apple certainly wasn’t the original inventor of the PC, nor the earliest to market a cellphone and neither the initial producer to sell an electronic watch, but here we are.
Apple is most often not the first to market, but don’t forget that after everyone has been playing marbles in the playground, Apple appears out of nowhere with a soccer ball.
The thoroughbreds have started the race, but going forward the biggest winners will be smaller companies providing services to the AI industry.
If you are not happy with your portfolio performance or would like a second opinion, please do not hesitate to contact Fenestra for a free, independent, objective and confidential review of your portfolio.
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