Chipmaker Nvidia (NVDA) saw its stock jump to a new all-time high after delivering groundbreaking first-quarter earnings and forward guidance. Some rival chipmakers will also benefit from the company’s soaring fortunes.
Key things
- Nvidia stuns Wall Street with 50% higher Q2 forecast.
- The firm’s key suppliers will benefit from “growing demand”.
- Market leaders in CPU technology could suffer from GPU change.
Santa-Clara, California-based company reported better-than-expected first-quarter earnings with net profit up 26% year-over-year, while revenue beat the same period. But the big story was second-quarter estimates, which came in 50% higher than analysts expected as the company sees a surge in demand for its products.
CEO Jensen Huang attributed the company’s performance to “two simultaneous transitions” in accelerated computing and artificial intelligence.
Chip stock winners from Nvidia results, AI Boom
Nvidia’s success and push for AI in general will also boost the fortunes of some other chipmakers, such as the Netherlands’ ASML (ASML) and Taiwan Semiconductor Manufacturing Co. (TSM). ASML makes machines for Nvidia, while TSM supplies it with GPU technology.
Nvidia’s forecasts and Huang’s statement that it saw “growing demand” boosted the outlook for ASML and TSMC, whose shares rose 5% and 12% at 11:30 a.m. ET Thursday.
Analysts at Wedbush Securities expect cloud vendors to be the “primary beneficiaries” of Nvidia’s increased data center offerings. And some of that advantage is already starting to spill over.
Cloud Super Micro Computer (SMCI), an enterprise cloud and AI company, also saw its shares jump over 20% in early trading on Thursday. Just three days ago, the company announced a data center solution with Nvidia.
Intel and AMD may be feeling the heat from Nvidia’s success
However, Nvidia’s current wave is not lifting all boats, as technology in the industry is shifting from CPU to GPU processing. Intel (INTC) was the dominant player in CPUs with AMD (AMD) as its main rival. Nvidia is the market leader in GPU technology and its recent growth is driven by the rush to adopt AI technologies.
“The flashpoint was generative AI,” Huang told CNBC. “We know CPU scaling has slowed down, we know accelerated computing is the way forward, and then the killer app comes along.”
Nvidia also reported record data center revenue, and the company said CPUs will lag in that area as well.
It may not be all bad news for INTC and AMD.
“The rise in demand for AI could drive higher CPU demands and/or potentially create an opportunity for either vendor to gain some share of AI silicon in the future. At the same time, we continue to see increased investment in AI, which is likely to cannibalize demand for off-the-shelf data center servers in the near term. -term,” Wedbush analysts wrote.
