Nvidia’s recent success can be largely attributed to its data center business, which experienced a significant growth of 427% in the latest quarter due to high demand for its artificial intelligence processors. The company is now assuring investors that their customers will be able to see returns on their investments in AI, addressing concerns about the sustainability of the AI boom as companies move beyond the initial stages of development.
The majority of Nvidia’s data center sales come from big cloud providers such as Amazon Web Services, Microsoft Azure, Google Cloud, and Oracle Cloud, which accounted for a significant portion of the $22.56 billion in data center sales in the April quarter. Additionally, there is a new wave of specialized GPU data center startups that purchase Nvidia GPUs, set up server racks with them, connect to the internet, and offer them for rent to customers on an hourly basis, catering to AI developers who require access to Nvidia hardware for training large language models.
Newly released Nvidia hardware promises even higher returns on investment, with finance chief Colette Kress revealing that cloud providers can rent out Nvidia hardware for five times the initial cost over four years, with newer hardware offering an even stronger return on investment. This includes products like the HDX H200, which combines 8 GPUs and provides access to models like Meta’s Llama AI. The utilization of the chips plays a significant role in determining their profitability, with factors such as whether they are running 24/7 or less frequently impacting the return on investment.
Nvidia CEO Jensen Huang highlighted the high demand for GPUs from AI startups, cloud providers, and companies like Meta, with businesses putting pressure on Nvidia to deliver systems quickly. Meta’s significant investment in Nvidia chips, despite not being a cloud provider, underscores the importance of these chips in AI production. Nvidia also announced an aggressive timeline for its next-generation GPU, Blackwell, which will be available in data centers in the fiscal fourth quarter, alleviating concerns about a slowdown in demand for the latest technology.
Following Nvidia’s strong earnings report and stock split announcement, the company’s shares saw a 6% increase in extended trading, surpassing $1,000 for the first time. The success of Nvidia’s data center business, driven by the AI boom and high demand from cloud providers and startups, has positioned the company for continued growth in the industry. As companies increasingly rely on AI technology for various applications, Nvidia’s GPUs play a crucial role in enabling businesses to leverage the power of artificial intelligence for profitability and growth.
