Nvidia makes record profits

23 February 2024By John Fowler, Jeremy Dicker and Helen Zhang

US chipmaker Nvidia is on top of the world after yesterday’s quarterly earnings report, which revealed the firm tripled its revenue to $22.1B in just a year. The most intriguing bit? This could just be the beginning.

CEO Jensen Huang co-founded Nvidia in 1993 (in a Denny’s!) with a focus on chips for video games. Gaming involves processing lots of data at once, rather than sequentially. And it turns out it’s similar for artificial intelligence (AI).

This overlap between gaming and AI dawned on Huang 15 years ago, so he made a massive bet, reorienting Nvidia towards AI.

Now, with software like ChatGPT waking the world up to AI’s potential and nudging us towards what Huang calls an AI “tipping point”, his bet is paying off.

Nvidia’s head-start means it now sells ~80% of all AI chips (at $25k to $250k a pop); it’s just added a record quarter trillion to its valuation in a day (like adding a new Disney or a Portugal); and it’s leap-frogged giants like Google to become the world’s fourth most valuable company.

So why are we talking about all this in a geopolitics briefing?

Because the implications are already rippling across our world.

First, there’s been a wave of enthusiasm from investors who are taking Nvidia's earnings report as confirmation that big change is indeed coming: the notion that AI could boost productivity and profits, for any industry and country, drove stock indices in the US, Japan and Europe to record highs.

And second, this has all dawned on governments too, who’ve spent the last few years developing strategies in preparation for an AI tipping point.

Singapore, the UK, China, the US, the UAE and beyond have all been investing billions to carve out some kind of national capability.

And on the regulatory front, while there are UN processes plus the Bletchley Declaration on AI principles, nervous capitals are still charging ahead solo:

The EU just finalised its AI Act (if you can’t beat ‘em, regulate ‘em), and
The US, mindful of AI’s national security implications, is struggling to onshore more chip production, while using export controls to restrict China’s chip access (with mixed success).

And sitting at the heart of all this is Nvidia, and the AI bottleneck it now controls.

That’s why Goldman Sachs, not exactly known for its breathlessness, just declared Nvidia the “most important stock on planet earth”.

INTRIGUE’S TAKE

Arthur C Clark once said that “any sufficiently advanced technology is indistinguishable from magic.” That really feels apt here, with folks describing visits to the most advanced chip foundries in quasi-religious terms, and guffawing over each new AI trick with 2007 levels of iPhone wonder.

The thing is, the world is now dependent on a handful of AI magicians: the US dominates advanced chip design and software, Taiwan dominates advanced chip manufacturing (including for Nvidia), and the Netherlands dominates the advanced chip lithography that underpins Taiwan’s foundries.

Of course, this attracts competitors at a company and country level: US firms like Intel and AMD are trying to close the gap with Nvidia, and China is pushing to close the gap with the US. But a look at Intel and AMD’s sagging share price is a reminder of how steep this technological climb is for any rival.

So for now, our world is dependent on a handful of magicians, who are in turn dependent on one another. And that sounds to us like a high-stakes world.