Nvidia CEO Jensen Huang: AI is at “tipping point”
Nvidia shares rose in after-hours trading on Wednesday, as the chipmaker beat sales expectations and said it is benefiting from a growing boom in AI tech powered by chatbots like OpenAI’s ChatGPT.
The U.S.-based chip company’s revenue fell as it reported revenue of $6.1 billion last quarter, down 21% from what it reported a year ago. (Those sales were a record $7.6 billion for the chipmaker.) The company’s net income was $1.5 billion, down 52% year over year.
Still, Nvidia shares rose 8.9% in after-hours trading after Nvidia CEO Jensen Huang expressed optimism about the company’s prospects for AI technology, which Huang says is at a “tipping point.” Speaking to analysts, Nvidia’s CEO said that activity around its AI services – fueled by the viral success of chatbots like ChatGPT – has “just gone through the roof” in recent months.
The chip company said it would work with cloud providers to offer enterprise customers access to Nvidia’s AI services. Huang said companies now have “a sense of urgency … to develop and deploy AI strategies,” but indicated that companies are facing “an insurmountable barrier” to gaining access to infrastructure, algorithms and techniques for AI
AI requires a lot of computing power, which can be expensive even for large companies, let alone startups. John Hennessey, the chairman of Google’s parent company Alphabet, suggested to Reuters that an AI-powered search using Google’s Bard AI currently costs 10 times more than a standard keyword search.
Nvidia’s dominance of the AI chip market has put the company in the US regulatory crosshairs as Washington seeks to limit sales of advanced semiconductors to Chinese companies. The company later developed a restricted version of its AI chip for the Chinese market to comply with US restrictions.
gaming slump
The AI tech boom could help offset a slumping part of the business: video games. Nvidia makes graphics processing units (GPUs) that help create the computer graphics used in today’s video games. Nvidia’s gaming revenue fell 46% year over year to $1.83 billion last quarter. (By contrast, data center revenue, which comprises much of Nvidia’s AI business, grew 11% over the same period.)
Game sales boomed during the pandemic as consumers stuck at home turned to digital entertainment. But inflation and people returning to work have led to a slump in sales of PCs, smartphones and video game devices such as Nintendo’s Switch, the only video game device to use an Nvidia chip.
“Gaming is recovering from the post-pandemic downturn,” Huang said Wednesday as part of the company’s earnings report, noting strong demand for the company’s latest GPUs.
Rival chip company AMD reported a smaller decline in gaming revenue last quarter, with $1.6 billion in gaming revenue down 6% year over year. Both Microsoft and Sony use AMD chips for their video game consoles.
On Tuesday, Nvidia announced that it will bring Microsoft-published games to the company’s GeForce Now service, which allows users to stream graphics-intensive games hosted on an Nvidia server. Microsoft agrees to offer its games on more platforms to reassure regulators worried about upcoming Activision Blizzard acquisition.
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