Alexander Lewis
Mar 05, 2024
Nvidia's GPUs have taken centre stage as they play a vital role in training large language models (LLMs), which are the foundation of popular generative AI applications like ChatGPT.
Numerous cloud service providers are eager to acquire Nvidia's GPUs to train their AI models and introduce generative AI services to the market. Consequently, Nvidia currently commands an impressive 90% share of the AI training chip market.
Nvidia stock split
The demand for Nvidia's flagship H100 AI GPU is incredibly high, with customers willing to wait between 36 and 52 weeks to obtain this hardware. To meet this strong demand, Nvidia is ramping up its supply capacity. This robust demand is expected to propel Nvidia's revenue to more than double by fiscal 2027 compared to the $60.9 billion reported in fiscal 2024.
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Additionally, comments from Kress indicate that 40% of Nvidia's data centre revenue comes from selling chips used for AI inference applications. This suggests that Nvidia's remarkable growth could continue for an extended period, as AI inference chips are projected to dominate the overall AI chip market. According to TechSpot, inference is anticipated to represent 45% of the AI chip market in the future, while AI training chips will comprise 15% of this sector.
Nvidia's dominance in the AI inference market is already evident, with its revenue from AI inference chips surpassing industry estimates. With the potential revenue opportunity projected to reach $90 billion by 2030, Nvidia's data centre revenue could continue to grow significantly, driving overall business growth.
Furthermore, Nvidia is positioning itself as a leader in the AI inference space by considering a move into custom chips, known as application-specific integrated circuits (ASICs), designed specifically for AI inference purposes. The market for custom chips used for inferencing is expected to grow substantially from an estimated $30 billion in 2023 to $50 billion in 2025.
Considering Nvidia's projected earnings and revenue growth, analysts foresee outstanding growth for the company.
With forward earnings multiple lower than its five-year average and an attractive price/earnings-to-growth ratio (PEG ratio), Nvidia's stock presents an enticing opportunity for investors. Despite its significant surge in the past year, Nvidia remains undervalued, making it a compelling choice for investors seeking exposure to the AI sector.
