Whatâs Going On Here?Nvidia reported better-than-expected quarterly earnings earlier this week, and the US chipmaker sure is in bright spirits about its remarkably cloudy-looking forecast. What Does This Mean?Nvidia made a name for itself by manufacturing graphics chips for gamers. Thatâs still the biggest part of its business today, so itâs a promising sign that the segmentâs sales grew 42% last quarter compared to the same time last year. But it was Nvidiaâs data center business â which sells cloud computing chips â that really impressed investors: its sales grew by a better-than-expected 55% last quarter. That helped boost the companyâs revenue by 50% to a record high of $7 billion. Nvidia seems optimistic about the future too, giving a higher-than-expected revenue forecast for this quarter. Investors didnât need telling twice: they sent its shares up 10%. Why Should I Care?For markets: Nvidiaâs found its niche.
Nvidiaâs share price has more than doubled this year, bringing its market value to around $800 billion. Thatâs over three times as much as that of rival chipmaker Intel, even though Intelâs yearly revenue is three times higher than Nvidiaâs. Investors, after all, value growth above all things, and Nvidia has that locked down: its chips are far better suited than Intelâs to artificial intelligence, which is one of the fastest-growing areas of the cloud industry. That might be why Nvidiaâs quarterly revenue has grown by 56% on average over the last two years, versus Intelâs measly 4%.
Zooming out: Life isnât fair.
Sweet results or no, Nvidiaâs probably a little bitter right now: the firmâs been trying to acquire British chip designer ARM for over a year, but Europe opened a potentially deal-scuppering investigation into the transaction last month. And it wasnât done there, saying this week that itâs also looking to subsidize European chipmakers in a bid to ease the supply crisis â a move that would give them an unfair advantage over non-European chipmakers like Nvidia. | 