The tech giant at the center of the generative AI boom saw its value soar nearly 800% from early 2023 to its peak in June, as institutional and retail investors alike bet that its chip business would remain indispensable to companies developing powerful AI models. The company is now worth more than $3 trillion and briefly became the world’s most valuable company.
But since then, the company’s stock has seen some volatile swings. After peaking in June, the company lost about $750 billion in six weeks as major customers like Google and Microsoft made it clear that their huge investments won’t be yielding profits anytime soon.
As investors prepared for Nvidia’s second-quarter earnings release after the market closed on Wednesday, they were hoping for answers about what the future might hold for one of the AI industry’s most hyped companies.
Nvidia’s response suggests the company may soon follow Apple’s lead. Here’s why.
Nvidia’s future is more like Apple’s
The iPhone remains Apple’s biggest revenue driver, but growth has slowed in recent years. Apple
Nvidia CEO Jensen Huang had been telling investors the same story for some time: The boom in generative AI was made possible by his company’s chips and GPUs, and since the technology sector is now fully committed to AI, demand for it will continue.
Nvidia’s first-quarter results this year have convinced investors that this is indeed the case. The company reported quarterly revenue of $26 billion, an astonishing 262% increase over the same quarter last year.
Second-quarter results, however, appeared less reassuring, with Nvidia shares falling 7% in after-hours trading on Wednesday after the company reported a smaller 122% increase in quarterly revenue from the same period last year ($30 billion).
It is noteworthy that this is a record for Nvidia. The company has never had as much revenue in three months as it did in the last quarter. And the forecast for the next quarter suggests that another record will be set.
All of this suggests that Nvidia is still a successful company, even though the country is currently facing a similar downturn to what Apple has experienced over the years.
The smartphone maker has remained one of Silicon Valley’s most stable companies, even though its biggest revenue generator, the iPhone, has struggled with declining sales for a number of reasons.
On the one hand, the smartphone market has become increasingly saturated since the launch of the iPhone in 2007. On the other hand, consumers’ appetite for devices that are continuously improved every year has decreased.
This is one of the main reasons why Apple’s net revenue fell to $383.3 billion in its last full fiscal year, compared to $394.3 billion the year before.
While Nvidia investors don’t need to brace for revenue to decline anytime soon, the slower growth released Wednesday suggests the company could follow a similar trajectory to Apple if growth continues to slow in the coming quarters. Both companies have revenue drivers that will remain in place, but growth will be less robust than in the past.
Huang is naturally optimistic that demand for the next generation of Blackwell GPU will increase later this year, and has planned an annual chip release for Nvidia, modeled on Apple’s annual iPhone release.
With the generative artificial intelligence boom expected to dominate the tech industry for years to come, GPUs will continue to be a necessary purchase for companies looking to lead in artificial intelligence, so Nvidia is unlikely to see a sudden exodus of buyers.
Wedbush analysts, including Dan Ives, commented in a research note: “Demand for AI GPUs currently far exceeds Nvidia’s supply, and Wall Street should view these results as a very bullish indicator for the entire technology sector, in our view, with shock and awe rather than a shrug.”
However, Huang’s clients are under pressure to prove to their investors that buying Nvidia GPUs will prove profitable sooner rather than later. If they fail to do so, demand is likely to continue to decline.
