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The Street
The Street
Luc Olinga

Nvidia's Jaw-Dropping $200 Billion Jump

Nvidia's starting the year with fanfare. 

The manufacturer of chips and graphics-processing units is rebounding out of a dark, even nightmarish, year. 

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After two sparkling years, Nvidia shares in 2022 lost half their value. More than $300 billion in market capitalization was wiped out on fears that the economic downturn, which particularly hits purchases of tech products, was going to deepen into a recession.

The Santa Clara, Calif., company was pushed out of the top 20 largest companies in the world by market cap.

At the time, Nvidia found itself with large inventories. The company admitted that it had too many graphics-processing units, RTX 3000 graphics cards, left in stock. The surplus stemmed from the drop in demand from consumers, especially gamers.

Nvidia Stock Up 62% in 2023 -- Look to AI

Nvidia was also hurt by an expected drop in demand for its graphic cards in the crypto industry, after ethereum, one of the most active crypto platforms, abandoned a transaction-validation mechanism that required significant computing power.

Less than two months into 2023, Nvidia is no longer the same company; everything has changed. Nvidia is having a dream start to the year on the stock market, with the shares up 62%, translating into a nearly $230 billion increase in market capitalization. 

The biggest jump was made in one trading session: Nvidia gained more than $75 billion in market value during the current Feb. 23 trading session after it reported its fourth-quarter results.

At last check the stock (NVDA) was up 14% at $237.26. This stock had closed 2022 at $146.14. 

The new excitement around Nvidia is tied to the artificial-intelligence craze that has gripped investors, particularly the popularity of ChatGPT, the new chatbot that is revolutionizing internet search and threatens to make Google search obsolete.  ChatGPT is the consumer version of the AI ​​revolution that was supposed to disrupt all industries like the dot-com era in its time.

"Nvidia surged in the wake of its fourth-quarter results based on its guidance and emergence as the AI leader," said Navellier analyst Louis Navellier. 

Nvidia, experts say, will be one of the big winners of the AI ​​era because the company designs the graphics chips necessary for AI applications. The more companies and consumers use these AI applications, the greater the demand for Nvidia GPU computing.

Heavy use of ChatGPT will require more computing power to provide responses to user requests.

"We believe Nvidia has in ChatGPT a potentially meaningful compute demand driver," Citigroup analyst Atif Malik wrote in a recent research note.

The analyst indicates that rapid growth of ChatGPT could result in sales of between $3 billion and $11 billion for Nvidia over one year. 

Nvidia Is Optimistic: 'AI Adoption at Inflection Point'

Nvidia has indicated that it is partnering with Oracle (ORCL), Microsoft (MSFT) and Alphabet's Google (GOOGL) to offer its GTX machines in order to do AI processing via simple browser access. The group has also announced its own AI cloud service.

"AI adoption is at an inflection point. Open AI's ChatGPT has captured interest worldwide, allowing people to experience AI firsthand and showing what's possible with generative AI," Colette Kress, chief financial officer, told analysts on Feb.22.

"These new types of neural network models can improve productivity in a wide range of tasks, whether generating text like marketing copy, summarizing documents, creating images for ads or video games or answering customer questions.

"Nvidia's expertise spans across the AI supercomputers, algorithms, data processing and training methods that can bring these capabilities to enterprise. We look forward to helping customers with generative AI opportunities."

Kress added: "In addition to working with every major hyperscale cloud provider, we are engaged with many consumer Internet companies, enterprises, and start-ups. The opportunity is significant and driving strong growth in the data center that will accelerate through the year."

No surprise then that Nvidia has announced optimistic forecasts for the first quarter. The group expects revenue to rise 7.4% quarter over quarter, to $6.5 billion. 

In the fourth quarter, revenue was $6.05 billion.

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