Nvidia, the leader in AI in the US stock market, has seen a rapid rise in market value recently, exceeding one trillion US dollars, which is almost equal to the total market value of the cryptocurrency circle and almost twice the market value of Bitcoin. Why has Nvidia risen? What is Nvidia's position in the field of AI? What is the gap between AMD and it? This article will rely on data and analysis to help you understand Nvidia in a simple and easy-to-understand way.
Nvidia's business is mainly divided into five parts: 1. Data center, toB AI & cloud computing, these are in this area 2. Gaming graphics cards, which actually also include cards for cryptocurrency mining 3. Professional graphics cards, 3D design, etc. 4. Automotive chips 5. OEM and others
As can be seen from the above figure, Nvidia's main business has shifted from gaming graphics cards to data centers. Analyzing the quarterly data trend, it is not difficult to see that in Q3 of Nvidia's fiscal year 23, which corresponds to July-September 22, gaming graphics cards hit a low point. September 22 was the time when ETH Merge occurred, from POW to POS, a large number of graphics card mining machines were eliminated, and Nvidia gaming graphics cards have only recovered to 60% of the level a year ago.
Although the overall revenue has not yet recovered to its peak, the data center business, that is, the business line of cloud computing & AI, has maintained continuous growth. Although the data looks average, with a year-on-year growth of 14% and a month-on-month growth of 18%, what is more important is that at the moment when ChatGPT is booming, various companies have bought cards and worked hard on the general large model, which has given this business a good growth prospect.
Stock speculation is similar to cryptocurrency speculation, especially for growth stocks, where stock prices are greatly affected by expectations and narratives. See the figure below. Since the launch of ChatGPT last year, Nvidia's valuation has been rising relative to AMD, and is already 3 times higher. PS: EV/EBITDA is a common indicator for valuing technology stocks.
Why didn't AMD get a share of the spoils? After all, AMD claims that "U beats Intel, and GPU beats Nvidia." This is because Nvidia is not only a hardware manufacturer, it also dominates the software ecosystem in the field of accelerated computing. Its CUDA framework has been downloaded 40 million times and has 4 million developers. This means that AI research and development is not only based on Nvidia's hardware, but also on its software, which is unmatched by AMD.
Simply put, Nvidia is the equivalent of Intel + Microsoft in the PC field in the field of AI computing. AMD recently took advantage of TSMC's advanced process advantages to achieve U seconds Intel, but what if Intel and Microsoft were one company? Or to put it simply, Nvidia is like Apple in the field of AI. See the pie Nvidia painted in the figure below, it can be seen that it believes that in the data center business, software and hardware have the same space of 300 billion US dollars.
Comparing the five-year return rate, Nvidia's 5x return far exceeds BTC/ETH. Considering that its revenue has more than doubled, it can be roughly said that a small half of this increase is contributed by fundamentals, and the other half is contributed by valuation, especially the recent increase is basically all contributed by the increase in valuation.
Summary: With the transition of ETH from POW to POS and the AI boom, Nvidia's main business has shifted from gaming graphics cards to data centers. Nvidia's hardware and software capabilities in the field of AI are comparable to Apple, while AMD lacks a software ecosystem. The recent rise is mainly due to the good development expectations and narrative hype in the field of AI, which has led to an increase in valuation.
