Nvidia is talk of the town at AI events leading into this week’s earnings
Nvidia founder and CEO Jensen Huang displays products on-stage during the annual Nvidia GTC Artificial Intelligence Conference at SAP Center in San Jose, California, on March 18, 2024.
Josh Edelson | Afp | Getty Images
At the start of last week, OpenAI’s technology chief personally thanked Nvidia CEO Jensen Huang for “bringing us the most advanced” chips needed to run the demo for a presentation the company delivered on its latest artificial intelligence models.
A day later, at Google’s annual developer conference, Alphabet CEO Sundar Pichai highlighted his company’s “longstanding partnership with Nvidia,” and noted that Google Cloud will be using the chipmaker’s Blackwell graphics processing units (GPUs) in early 2025.
And this week, Microsoft, which provides servers to OpenAI, will announce new AI advancements and features that were developed on the company’s massive clusters of Nvidia GPUs. The company is hosting its Build conference in Redmond, Washington.
Heading into its quarterly earnings report on Wednesday, Nvidia finds itself at the center of the action in technology, a position that’s become increasingly commonplace for the 31-year-old company, whose market cap has ballooned past $2 trillion this year.
Nvidia is expected to report year-over-year revenue growth in excess of 200% for a third straight quarter, with analysts projecting a fiscal first-quarter bump-up of 243% to $24.6 billion, according to LSEG. More than $21 billion of that is expected to come from Nvidia’s data center business, which includes all the advanced processors the company is selling to Google, Microsoft, Meta, Amazon, OpenAI and others.
Nvidia is squeezing so much profit out of its AI suite of products that net income is expected to be up more than fivefold from a year earlier to $13.9 billion.
The stock has soared 91% this year after more than tripling in 2023.
Dan Niles, founder of Niles Investment Management, compared Nvidia’s position in the AI boom to the “internet buildout” of the 1990s and Cisco’s role at the center in those days. Over a three-year stretch, Niles said, Cisco had several dramatic pullbacks, but ultimately increased 4,000% up to its peak in 2000. Nvidia will go through similar cycles, he said.
“We’re still really early in the AI build,” Niles told CNBC’s “Money Matters” on Monday. “I think the revenue will go up three to four times from current levels over the next three to four years, and I think the stock goes with it.”
Google, Amazon, Microsoft, Meta, and Apple are expected to shell out a combined $200 billion in capital expenditures this year, according to an estimate from Bernstein, with a huge portion of the spending going to AI-specific infrastructure like Nvidia chips.
Elsewhere, OpenAI is relying on Nvidia’s technology for its latest chatbot, GPT-4o. Meta announced plans in March to buy and build out computers that will include 350,000 Nvidia GPUs, costing billions of dollars, and CEO Mark Zuckerberg even swapped jackets with Huang and posed for a picture with the Nvidia CEO.
“If you look at today for the AI build out, who’s really driving that?” Niles said. “It’s the most profitable companies on the planet — it’s Microsoft, it’s Google, it’s Meta, and they’re driving this.”
Jensen Huang, co-founder and chief executive officer of Nvidia Corp., arrives at an event in Taipei, Taiwan, on Thursday, Jan. 25, 2024.
Lam Yik Fei | Bloomberg | Getty Images
Prior to the recent AI boom, Nvidia was known as the primary maker of chips used for 3D gaming. About a year ago, the chipmaker gave investors their first clue that the company would see a period of historic growth, signaling to Wall Street that it would generate about 50% more in sales than what analysts expected in the July 2023 quarter.
Growth rates have since accelerated. But starting in the second quarter, expansion is expected to slow, with analysts anticipating significant deceleration in each of the next three periods.
“We just don’t know how long this investment cycle lasts and just how much excess capacity will be created over that time in case this AI thing doesn’t materialize as quickly as expected,” Bernstein analysts wrote in a note earlier this month.
That’s not to say that Nvidia is at risk of losing a ton of the AI chip business to rivals. Piper Sandler analysts expect it to keep at least 75% of the AI accelerator market, even as companies like Google build their own custom chips.
“We view the percentage of hyperscaler spend that is dedicated towards compute further rising in 2024 and 2025,” Piper Sandler analyst Harsh Kumar wrote in a note.
One question the company faces is how well the transition is going to its next generation of AI chips, called Blackwell, which are expected to ship later this year. Some worry there could be a lull as clients hold off on buying the older Hopper GPUs like the H100 in favor of Blackwell-based chips such as the GH200.
“To some degree, the setup has shifted,” wrote Morgan Stanley analyst Joseph Moore in a note on Monday. “Six months ago, short term expectations were very strong but there was anxiety about durability. Now, fresh on the back of hyperscalers talking up longer term spending expectations for AI, those longer term views are more positive, but there is anxiety about a pause in front of Blackwell.”
Technology
As nations build ‘sovereign AI,’ open-source models and cloud computing can help, experts say
Digital illustration of a glowing world map with “AI” text across multiple continents, representing the global presence and integration of artificial intelligence.
Fotograzia | Moment | Getty Images
As artificial intelligence becomes more democratized, it is important for emerging economies to build their own “sovereign AI,” panelists told CNBC’s East Tech West conference in Bangkok, Thailand, on Friday.
In general, sovereign AI refers to a nation’s ability to control its own AI technologies, data and related infrastructure, ensuring strategic autonomy while meeting its unique priorities and security needs.
However, this sovereignty has been lacking, according to panelist Kasima Tharnpipitchai, head of AI strategy at SCB 10X, the technology investment arm of Thailand-based SCBX Group. He noted that many of the world’s most prominent large language models, operated by companies such as Anthropic and OpenAI, are based on the English language.
“The way you think, the way you interact with the world, the way you are when you speak another language can be very different,” Tharnpipitchai said.
It is, therefore, important for countries to take ownership of their AI systems, developing technology for specific languages, cultures, and countries, rather than just translating over English-based models.
Panelists agreed that the digitally savvy ASEAN region, with a total population of nearly 700 million people, is particularly well positioned to build its sovereign AI. People under the age of 35 make up around 61% of the population, and about 125,000 new users gain access to the internet daily.
Given this context, Jeff Johnson, managing director of ASEAN at Amazon Web Services, said, “I think it’s really important, and we’re really focused on how we can really democratize access to cloud and AI.”
Open-source models
According to panelists, one key way that countries can build up their sovereign AI environments is through the use of open-source AI models.
“There is plenty of amazing talent here in Southeast Asia and in Thailand, especially. To have that captured in a way that isn’t publicly accessible or ecosystem developing would feel like a shame,” said SCB 10X’s Tharnpipitchai.
Doing open-source is a way to create a “collective energy” to help Thailand better compete in AI and push sovereignty in a way that is beneficial for the entire country, he added.
Open-source generally refers to software in which the source code is made freely available, allowing anyone to view, modify and redistribute it. LLM players, such as China’s DeepSeek and Meta’s Llama, advertise their models as open-source, albeit with some restrictions.
The emergence of more open-source models offers companies and governments more options compared to relying on a few closed models, according to Cecily Ng, vice president and general manager of ASEAN & Greater China at software vendor Databricks.
AI experts have previously told CNBC that open-source AI has helped China boost AI adoption, better develop its AI ecosystem and compete with the U.S.
Access to computing
Prem Pavan, vice president and general manager of Southeast Asia and Korea at Red Hat, said that the localization of AI had been focused on language until recently. Having sovereign access to AI models powered by local hardware and computing is more important today, he added.
Panelists said that for emerging countries like Thailand, AI localization can be offered by cloud computing companies with domestic operations. These include global hyperscalers such as AWS, Microsoft Azure and Tencent Cloud, and sovereign players like AIS Cloud and True IDC.
“We’re here in Thailand and across Southeast Asia to support all industries, all businesses of all shapes and sizes, from the smallest startup to the largest enterprise,” said AWS’s Johnson.
He added that the economic model of the company’s cloud services makes it easy to “pay for what you use,” thus lowering the barriers to entry and making it very easy to build models and applications.
In April, the U.N. Trade and Development Agency said in a report that AI was projected to reach $4.8 trillion in market value by 2033. However, it warned that the technology’s benefits remain highly concentrated, with nations at risk of lagging behind.
Among UNCTAD’s recommendations to the international community for driving inclusive growth was shared AI infrastructure, the use of open-source AI models and initiatives to share AI knowledge and resources.
Technology
Amazon CEO Jassy says AI will lead to ‘fewer people doing some of the jobs’ that get automated
Amazon CEO Andy Jassy said the rapid rollout of generative artificial intelligence means the company will one day require fewer employees to do some of the work that computers can handle.
“Like with every technical transformation, there will be fewer people doing some of the jobs that the technology actually starts to automate,” Jassy told CNBC’s Jim Cramer in an interview on Monday. “But there’s going to be other jobs.”
Even as AI eliminates the need for some roles, Amazon will continue to hire more employees in AI, robotics and elsewhere, Jassy said.
Earlier this month, Jassy admitted that he expects the company’s workforce to decline in the next few years as Amazon embraces generative AI and AI-powered software agents. He told staffers in a memo that it will be “hard to know exactly where this nets out over time” but that the corporate workforce will shrink as Amazon wrings more efficiencies out of the technology.
It’s a message that’s making its way across the tech sector. Salesforce CEO Marc Benioff last week claimed AI is doing 30% to 50% of the work at his software vendor. Other companies such as Shopify and Microsoft have urged employees to adopt the technology in their daily work. The CEO of Klarna said in May that the online lender has managed to shrink its headcount by about 40%, in part due to investments in AI and natural attrition in its workforce.
Jassy said on Monday that AI will free employees from “rote work” and “make all our jobs more interesting,” while enabling staffers to invent better services more quickly than before.
Amazon and other tech companies have also been shrinking their workforces through rolling layoffs over the past several years. Amazon has cut more than 27,000 jobs since the start of 2022, and it’s announced smaller, more targeted layoffs in its retail and devices units in recent months.
Amazon shares are flat so far this year, underperforming the Nasdaq, which has gained 5.5%. The stock is about 10% below its record reached in February, while fellow megacaps Meta, Microsoft and Nvidia are all trading at or very near record highs.
WATCH: Jassy says robots that will eventually do delivery and transportation
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