MAGGIE PAGANO: Chips are up for AI pioneer

Investors were running out of superlatives to describe the astonishing record results of Nvidia, the world’s leading AI chipmaker that recently joined the world’s exclusive Trillion Dollar club alongside Apple, Amazon, Alphabet, Microsoft and Saudi Arabia’s Aramco.

“Stunning,” “remarkable,” and “blockbuster” were just a few of the adjectives used to greet the quarterly earnings release in the US late Wednesday.

They showed sales doubling and profits exploding, pushing the share price to a new all-time high.

To say that Wall Street is in love with Nvidia might be a bit of an exaggeration.

Still, the tech giant has an almost fanatical fan base, with analysts hyped the stock so much that it has more than tripled in value this year, pushing its valuation from less than £300 billion to nearly £1 trillion (and well over $1 trillion in dollar terms). increased. ) Today.

It is the only chip maker in the world to reach this level and the highest-yielding stock in the S&P 500.

Here’s another word to add to the list: “bellwether” – the status Nvidia has in the US economy. It is rare that one company’s results are considered as important to the future direction of financial markets as what US Federal Reserve Chairman Jerome Powell has to say today in Jackson Hole.

Still, Nvidia’s role as a benchmark is exactly what top Wall Street gamblers have argued about its performance this week, arguing that a bullish roll would be a key indicator of AI’s prominence in the tech sector, and therefore a good guide for confidence in the technology sector. the broader markets.

Nvidia came as trump card. Revenue doubled in the second quarter to a record $13.5 billion (£10.7 billion), while net profit reached $6.2 billion (£4.9 billion), beating Wall Street’s wildest dreams. The gauge hit the right note: Nvidia’s results caused a rally in global technology stocks.

There’s more to come. The Santa Clara company says next quarter sales will be even higher at $16 billion (£12.7 billion). Nvidia boss Jensen Huang added that companies around the world are now moving from general use to accelerated computing and generative AI, and hailed the start of a new computing era.

Nvidia is at the forefront of this. It started in the 1990s by making computer chips for processing graphics for 3D computer games. But lately, co-founder Huang has been determined to adapt to AI.

Unlike rivals like Intel and Micron Technologies, Nvidia’s focus has been on its data center business, which includes making AI chips for all the major artificial intelligence apps in the world, including ChatGPT.

The strategy worked: It has about 95 percent of the market for all machine learning.

However, such dominance brings problems, not least with China.

The US is considering restricting Nvidia chip exports to China over national security concerns.

Nvidia disagrees, arguing that by halting exports, the US is holding back its domestic industry in the race to become the leading global AI superpower. The battle has begun.

All Brics but no mortar

There has been much ado about the decision of the Brics countries – Brazil, Russia, India, China and South Africa – to invite six more countries, including Saudi Arabia and Iran, to join the alliance.

Chinese President Xi Jinping calls this move “historic” and an opportunity to reshape a multipolar world and turn global governance on its head.

His former adversary, Indian Prime Minister Narendra Modi, who now enjoys close relations with Xi, has also strongly supported the expansion, despite the country’s non-aligned status.

Only Brazilian President Luiz Inacio Lula da Silva was cautious, saying the Brics should remain multilateral rather than become an exclusive talking group to ensure it doesn’t become a ‘Tower of Babel’. Wise words. The new Brics will be a powerful bloc – 3.7 billion people and nearly half of the world’s GDP.

But they are diverse: Saudi Arabia and Iran have a history of troubled relations, while Saudi, the world’s largest crude oil exporter, sits alongside China, the world’s largest oil importer. Brazil is an agricultural exporter.

They all have different objectives: Xi wants to break away from the dollar, while India wants closer ties with the West.

Ex-Goldman Sachs economist Jim O’Neill coined the BRIC acronym over two decades ago to give a convenient name to several countries that he thought seemed promising to investors.

Even then, he said, they had nothing obvious in common. It seems less likely they will now, but expect them to be noisy.