'Nvidia with 90% GPU Supply Nears $1 Trillion Market Cap
Stock Prices of Related Companies Including Cloud and Software Firms Also Surge'
According to the British weekly magazine The Economist on the 29th (local time), semiconductor companies in the United States such as Nvidia, whose stock prices have soared due to the artificial intelligence (AI) boom, as well as specialized semiconductor, cloud, and software-related infrastructure companies, are showing signs of a major windfall.
Just as sellers of pickaxes and shovels made big money during the early days of the gold rush, the AI-related ecosystem as a whole is experiencing rapid growth.
Nvidia, considered a major beneficiary of AI and whose stock price has surged sharply this year, is approaching a market value of $1 trillion (approximately 1,325 trillion won). Nvidia currently supplies more than 90% of the high-value-added semiconductors such as graphics processing units (GPUs) used in AI development to the global market. Since the beginning of this year, Nvidia's stock price has risen about 160%, pushing its market capitalization beyond $960 billion.
Nvidia's stock price increase is largely influenced by its recently announced first-quarter sales. Thanks to the AI boom led by ChatGPT and others, its sales reached $7.19 billion, exceeding market expectations by more than 10%. Furthermore, Nvidia surprised investors by projecting second-quarter sales of $11 billion, which is more than 50% above forecasts.
The bright outlook is due to the surge in GPU demand driven by the AI boom. Elon Musk, CEO of Tesla, recently remarked that "GPUs are much harder to obtain than drugs." Investment bank UBS predicted that within the next one to two years, AI will increase GPU demand to between $10 billion and $15 billion.
Accordingly, AMD, which also designs GPUs, is expected to benefit as well. AMD's stock price has surged more than 98% this year. AMD plans to release a new GPU by the end of this year.
Since Nvidia and AMD are fabless semiconductor design companies, manufacturers producing AI semiconductors designed by them are also smiling. The world's largest semiconductor foundry, TSMC, counts Nvidia as a client. As Nvidia's AI semiconductor sales increase, TSMC's profits inevitably rise. Additionally, Besi, a Dutch semiconductor packaging equipment manufacturer, has seen its stock price rise nearly 80% this year.
Not only semiconductors but also cloud and software service providers and data center-related companies essential for AI operation are gaining importance. Big tech companies such as Google and Microsoft (MS) are competing in this market. As a result, companies supplying cloud services or manufacturing customized servers for data centers are also growing.
Moreover, the market for advanced networking equipment such as switches and routers has recorded an average annual growth rate of 40% over several years and is expected to grow to $9 billion by 2027, The Economist reported citing research firm 650 Group.
Broadcom, a semiconductor manufacturer that supports network operations, is expected to record related annual sales of $800 million this year, a fourfold increase compared to the previous year.
However, The Economist pointed out, "The biggest doubt is whether the AI boom itself can be sustained," adding, "Despite the success of ChatGPT and others, it remains unclear whether AI technology will bring profitability, so this whirlwind in Silicon Valley could turn into disappointment." It also noted that regulatory authorities' actions related to AI technology could damage AI's potential.
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