NVIDIA Corporation (NVDA) has been very busy this year.
In February, NVIDIA and Microsoft Corporation (MSFT) announced a 10-year agreement to bring Xbox PC games – created and owned by Microsoft – to NVIDIA’s cloud gaming service, GeForce NOW.
Microsoft Gaming CEO Phil Spencer said, “This partnership will help grow NVIDIA’s catalog of titles to include games like Call of Duty, while giving developers more ways to offer streaming games.” With the agreement, gamers will be able to stream Xbox PC titles from GeForce NOW to PCs, smartphones, smart TVs, and other devices.
Then in April, NVIDIA revealed that Google Cloud will be the first cloud services provider to use NVIDIA’s L4 Tensor Core GPU for artificial intelligence (AI) applications.
The L4 Tensor Core GPU offers AI video solutions, with more than 120X times the AI-powered performance of regular CPUs — and it’s 99% more efficient. Google Cloud management noted, “As our customers begin to explore the possibilities of generative AI, we’re proud to offer them NVIDIA’s latest L4 GPU innovation as part of our workload-optimized Compute Engine portfolio.”
This week, the chip maker made another announcement: It has a new artificial intelligence (AI) chip design.
So, in today’s Market 360, let’s dive into NVIDIA’s blockbuster news – and what it means for the future of AI. We’ll also review Wall Street’s lackluster response to the new superchip, and I’ll explain why NVIDIA remains a great buy right now.
New Chip on the Block
Remember that NVIDIA is a semiconductor manufacturer that makes high-end graphics processing units (GPUs). From video games to professional visualization, datacenter and automotive applications, NVIDIA’s graphics cards enhance the processing capability of its users’ computers.
GPUs have become the favored chips for the large AI models used in generative AI software (like ChatGPT). So, NVIDIA’s GPUs have clearly been in high demand as the AI competition continues to heat up this year.
And that’s what makes the company’s announcement this week so significant…
On Tuesday, NVIDIA revealed a new chip designed to speed generative AI applications. This chip is called the GH200 Grace Hopper Superchip. According to NVIDIA’s website, the chip is made for “giant-scale AI and high-performance computing (HPC) applications.” The GH200 will enable “scientists and researchers to reach unprecedented solutions for the world’s most complex problems.”
This new superchip has the same GPU as the H100, the company’s current highest-end AI chip. However, while the H100 only has 80 gigabytes of memory, the GH200 has 141 gigabytes of memory, as well as a 72-core ARM central processor.
“The additional memory, it just simply increases the performance of the GPU,” said NVIDIA’s vice president of hyperscale and HPC, Ian Buck.
Because it has more memory capacity, the GH200 is designed for inference. Inference is when an AI model is used in software to generate content or make predictions.
“You can take pretty much any large language model you want and put it in this and it will inference like crazy,” NVIDIA CEO Jensen Huang said. “The inference cost of large language models will drop significantly.” He also noted, “Graphics and artificial intelligence are inseparable, graphics needs AI, and AI needs graphics.”
Essentially, NVIDIA’s newest superchip will simplify AI development. And this simplification could change the current AI landscape, allowing artificial intelligence developers to use the GH200’s superior memory and performance to make more AI achievements and discoveries.
The GH200 should be available for sampling by the end of this year, and it will be fully available in the second quarter of 2024.
Why NVIDIA Remains a Great Buy
Unfortunately, investors weren’t nearly as excited about NVIDIA’s new superchip, as the stock fell more than 1% in the wake of the announcement and continued to climb lower through the rest of the week.
But don’t let the recent weakness spook you. NVIDIA is still a great buy.
The reality is NVIDIA really controls the semiconductor chip game… especially as some estimates calculate that NVIDIA controls the market for AI chips with over 80% market share.
In addition, NVIDIA boasts fantastic fundamentals: In its first quarter in fiscal year 2024, the company reported earnings of $1.09 per share on revenue of $7.19 billion. This was down from earnings of $1.36 per share and revenue of $8.3 billion in the same quarter a year ago, but still well ahead of analysts’ expectations for earnings of $0.92 per share and revenue of $6.52 billion.
But thanks to NVIDIA’s new products and the AI craze this year, its earnings and sales are expected to soar in its second quarter (the report is due to be released on August 23). Earnings are forecast to surge 303.9% year-over-year to $2.06 per share, up from earnings of $0.51 per share in the same quarter last year. Revenue is anticipated to jump 65.4% year-over-year to $11.09 billion, up from $6.7 billion in the same quarter a year ago.
Plus, earnings estimates have been revised 96.2% higher in the past three months, so NVIDIA could be gearing up for a big earnings surprise.
Last quarter, when NVIDIA beat on the top and bottom lines, shares soared more than 24% the day after the earnings were released. If NVIDIA continues to post strong earnings and sales growth – as I expect it will – its shares could be in for a repeat performance and add on to their 180% return this year.
If NVIDIA has blowout earnings, it is going help the whole market – and the whole AI sector.
I should also add that NVIDIA earns an A-rating in my AI Mastermind system, which means the stock a “Buy” right now.
(My proprietary AI Mastermind system tracks more than 6,000 stocks and determines if they’re good buys or not, just like what it did with NVIDIA.)
The bottom line: NVIDIA is a great stock with plenty of upside potential as it continues to dominate the AI space with its chip technology. So, don’t let the recent weakness deter you. Instead, take advantage of the weakness and buy the dip.
Sincerely,
Louis Navellier
P.S. A small group of wealthy Americans are using specialized, AI-powered stock market analysis to extract huge gains from the market.
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The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
NVIDIA Corporation (NVDA)
