Nvidia is one of the most valuable tech companies in the world, a feat that can only get better as it spearheads the next revolution of artificial intelligence. For the longest time, the company has been at the heart of developing graphics processing units (GPU) that power the multi-billion video gaming industry. It first made its mark in 2000, becoming the exclusive graphics provider for Microsoft’s Xbox.
Nvidia AI Empire
Revenue from the lucrative gaming industry accounts for more than 80% of the company’s total revenue. Last year gaming brought in over $9 billion. However, even as the chip giant continues to dominate the segment, it is already looking into the future, given its strides around artificial intelligence. Its GPU business is at the center of the new AI revolution, a development that continues to strengthen the company’s growth metrics and sentiments in the market.
Unknown to most people is that Nvidia started investing in AI before it became a phenomenon spearheaded by OpenAI’s ChatGPT breakthrough. As early as 2006, the tech giant released the software toolkit CUDA that will open up a wave of new opportunities around AI. Yet, for over ten years, Wall Street questioned why the company invested big in unproven technology.
Under the stewardship of Bryan, Catanzaro Nvidia continued to invest in the technology. Currently, the company employs thousands of staffers working on the technology. CUDA is the new way of writing computer programs that boast of transformational speeds that can unlock new opportunities around artificial intelligence.
Increased focus on GPU that powers artificial intelligence has helped offer a cushion amid the broader semiconductor industry struggles. Growing tensions between the US and China have forced the company to re-engineer its products in the race to be compliant with US laws. The banning of AI chips in China is another major headwind that the company has to address.
U.S-China Tension Headwind
Amid the growing tensions between the US and China, the company continues to attract big orders from other companies looking to leverage AI’s power. Companies are already boasting of the number of Nvidia’s A100 chips they use as the race heats up. Microsoft is spearheading the race, having used 10,000 of the chips on its supercomputer for OpenAI.
Nevertheless, gaming remains Nvidia’s primary business even as it moves to diversify its footprint into chips for powering the artificial intelligence world. It’s already using the technology to develop new chips for taking computer graphics and video games to a whole new level after the introduction of GeForce RTX.
Even as it focuses on producing chips for powering the multi-billion video gaming industry, the company is also sticking to its business model of contracting production. Although Nvidia has always contracted companies with vast chip production plants to produce its products for the longest time, the model has allowed it to keep its capital expenditure low.
However, its reliance on Taiwan Semiconductor Manufacturing to produce chips presents a new layer of uncertainty and concerns. Deteriorating ties between the US and China could bite the company, given that Beijing has always insisted Taiwan is part of its territories. In addition, the company stands to lose big on the $52 billion set aside under the CHIPS Act to incentivize companies that manufacture U.S. oil.