Nvidia’s Trillion Dollar Dreams – WSJ

The challenge of being Nvidia NVDA -3.36%

Billions of dollars just ain’t that cool these days.

The up-and-coming chipmaker used to use that designation to name its addressable markets, appropriate for a company that generates less than $5 billion in annual revenue, primarily from graphics processors used by PC gamers.

But Nvidia’s business has more than quintupled since those days, and its chips are now in demand for everything from gaming consoles to data centers to self-driving cars. Such growth requires that the company’s ambitions also increase; Nvidia told analysts Tuesday that it now sees a $1 trillion total addressable market for its growing line of chips and associated software.

Tech companies regularly float high-flying views of their potential, but Nvidia has particularly good reasons to aim high. Even with an 11% correction year-to-date, Nvidia’s market cap of around $655 billion is well above that of any other chip company.

It’s also about 12% ahead of Facebook parent Meta Platforms, which generates more than four times its annual revenue. A not-inconceivable 55% rally would take the company’s market cap above the $1 trillion mark. This is a stock that has more than doubled in value in each of the last two years, and was up 77% the year before.

Fortunately, many things are going in Nvidia’s direction. Tech giants like Amazon,

Microsoft and Google continue to pour billions into their networks to meet growing demand for their cloud computing services, while Facebook’s parent company plans a 66% increase in capital spending this year to begin building on the Metaverse to build on their founder’s dreams.

Market research firm Dell’Oro Group forecasts that total data center investments will rise by double digits this year, while analysts expect revenue from Nvidia’s data center segment to rise 52% over the same period. And that won’t even include the company’s first Arm-based CPU for servers, which Nvidia said Tuesday plans to begin shipping in 2023.

But Nvidia needs to look beyond its two core markets of video games and data center to maintain its position at the top of the chip stack. The company raised hopes for its auto segment on Tuesday, forecasting a “turnaround” in the second half of this year. This business has continued to make a low single-digit contribution to the company’s overall revenue base. Analysts now expect sales to grow more than 30% annually over the next two years — over $1 billion for the fiscal year ended January 2024, according to FactSet.

Nvidia’s longstanding work in the field of artificial intelligence has also created a vast library of software assets that the company is now looking to capitalize on. The company ultimately sees a $300 billion market licensing its software to companies building their own AI capabilities and for its “Omniverse” technology — Nvidia’s preferred term for the Metaverse. Raymond James analyst Chris Caso called software a “catalyst for future gross margin expansion” for Nvidia, which already has the third-highest gross margin in the PHLX Semiconductor Index, according to data from S&P Global Market Intelligence.

Nvidia certainly has big dreams. His track record of actually delivering great things makes her harder to turn down.

Metaverse evangelists say the future of life and work lies ahead. However, many of the applications focus on gaming and social interactions. NVIDIA’s Richard Kerris and Constellation Research’s Ray Wang explain what the metaverse means for CIOs.

write to Dan Gallagher at dan.gallagher@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

https://www.wsj.com/articles/nvidias-trillion-dollar-dreams-11648048409?mod=rss_markets_main Nvidia’s Trillion Dollar Dreams – WSJ

Ari Notis

TheHiu.com is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – admin@thehiu.com. The content will be deleted within 24 hours.

Related Articles

Back to top button