‘The age of AI is in full steam’ — Jensen Huang. 😳  Nvidia (NVDA) is the world’s second largest company by market cap, with a total dollar market value of US$3.398 trillion. The semiconductor maker’s stock climb has been credited with influencing as much as a third of 2024’s US share markets rally.

This November, Nvidia briefly passed the world’s largest company, Apple (AAPL), worth US$3.62 trillion. And despite Nvidia accounting for around 80% of the global GPU (graphics processing units) market — the tech used to train large language models (LLMs) such as ChatGPT — Apple isn’t training their AI models using Nvidia GPUs. However, Nvidia’s ahead of their largest customers Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG, GOOGL), Meta (META), and Tesla (TSLA).

Nvidia’s ascent was 31 years in the making. 🗓️ Nvidia, named from the Latin word for envy ‘invidia’, was founded in 1993 and listed on the Nasdaq in January 1999 at US$12 a share. They’ve executed six stock splits, including a 10:1 split this June. Since going public, Nvidia has soared 350,045% in 25 years. Year-to-date (YTD) they’ve climbed 187.83% and are up 204.64% year-over-year (YOY). 

Nvidia’s impact on indexes and ETFs

Did the Dow and S&P 500 hit ‘record’ highs because of Nvidia? 📈 This November, Nvidia replaced fellow chipmaker Intel (INTC) on the Dow — Intel’s stock has fallen 58% in five years, prompting the removal of CEO Bob Gelsinger. However, despite the S&P Dow Jones ranking Nvidia at number 21 of 30 companies comprising just 2.1% of the Dow, their inclusion may have helped to boost the ‘controversial’ index last month, which along with the S&P 500, reached a ‘record closing’ high. 

Nvidia’s significant stock climb has lifted the Nasdaq Composite Index — which came very close to its all time high this November — also lifting the index’s corresponding ETFs, Invesco QQQ Trust Series 1 (QQQ) and the Invesco Nasdaq 100 ETF (QQQM). But The Motley Fool’s Daniel Foelber has cautioned that Nvidia’s heavy weighting and ‘influence’ on major indexes, while helping them rise to new heights ‘could also make them more volatile’, he said.

‍The Motley Fool’s Anthony Di Pizio added that Nvidia’s high weighting on the Vanguard Growth Index Fund (VUG) along with Apple, Microsoft, Amazon and Meta, is the main reason behind the index fund’s rise — which he said was ‘led by Nvidia’:

‘Those five companies operate at the forefront of the AI revolution, dominating both the hardware and software sides of this emerging industry. Their stocks have delivered an average return of almost 61% in 2024, led by Nvidia, which has soared by 173% thanks to incredible demand for its AI data center chips.’ — Anthony Di Pizio, The Motley Fool

Nvidia’s Q3 earnings

The Guardian called Nvidia ‘the engine of the artificial-intelligence boom’ in their wrap of Nvidia's third quarter earnings. Highlights included:

• Posted revenue of US$35.08 billion, against Wall Street analyst expectations of $33.15 billion
• Posted revenue growth up 94% from Q3 2023 — US$35.08 billion up from US$18.12 billion one year ago
• Nearly doubling semiconductor sales and profits YOY
• Reported earnings of US$0.81 per share, against some Wall Street analysts expectations of US$0.75 per share
• Posted a projected Q4 revenue growth of 70% to grow to US$37.5 billion (plus or minus 2%), just higher than Wall Street analysts expectations of US$37.09 billion (on average)
• Increased market cap by around US$2 trillion in 2024 — briefly passing Apple in November 

The company's growth in their third quarter has been attributed by Nvidia founder and CEO Jensen Huang to ‘demand’ for their Hopper 100 GPU, and ‘anticipation’ for Blackwell, both designed to power AI and accelerated computing. Huang added:

‘AI is transforming every industry, company and country. Enterprises are adopting agentic AI to revolutionise workflows. Industrial robotics investments are surging with breakthroughs in physical AI. And countries have awakened to the importance of developing their national AI and infrastructure.’ — Jensen Huang, Nvidia founder and CEO

Are early Nvidia investors ready to retire?

What were you doing in 2004? 🤔 If while wearing terrifying fashion and crying over the final  episode of Friends, you’d called your broker (on your Blackberry, ofc) and invested just US$1,000 in Nvidia stock, you could be retirement-rich today. According to The Motley Fool, on 29 October, you’d have owned 480 NVDA shares valued at ‘more than US$1.2 million’ — that’s NZ$2.21M — which if you missed this robot art, may fetch you this BANANSKY duct tape prototype. 🍌

How does Nvidia make money?

Data centres are Nvidia’s money maker. 📊 Nvidia’s financial reports reveal the enormous revenue growth in data centre infrastructure such as computer and AI hardware and tools, along with robotics hardware, and their annually consistent gaming segment. This year, they connected the ‘synergistic’ AI capability with gaming, releasing Nvidia Ace, which enables developers to create ‘digital humans’. Nvidia hardware also supports 5G infrastructure, and Nvidia is expected to cater to demand for connectivity in driverless cars, and smart factories.

According to Yahoo! Finance’s Catherine Brock, Nvidia strengths mean they may be ‘insulated’ from the competition. This includes ‘(Huang’s) forward-thinking leadership, a proven ability to innovate, and a robust and proprietary platform around its hardware, including their outsourcing of production to companies such as Taiwan Semiconductor Manufacturing (TSM). Brock also highlighted risks, such as ‘rising competition, high investor expectations, and the changing demands of a fast-paced industry’.

What’s Wall Street saying about semiconductor stocks?

Competitors to Nvidia will need to scale, and do it quickly. ⏱️ A November report from the Semiconductor Industry Association, showed that global semiconductor sales grew 23.2% in Q3 compared to the same quarter in 2023, to US$166 billion, and are up 10% from Q2 this year. Demand grew by 46.3% in the Americas to US$17.2 billion, and 22.9% in China to US$16 billion. Garter data forecast that semiconductor revenue could grow 14% in 2025 to US$717 billion, which is slower than expected 2024 growth of 19%.

Six stocks some on Wall Street are watching are: Advanced Micro Devices (AMD), Taiwan Semiconductor Manufacturing (TSM), Synopsys (SNPS), Arm Holdings (ARM), Intel (INTC), and Qualcomm (QCOM). Here's how they have performed historically compared to Nvidia:

Nvidia vs Palantir

Nvidia and Palantir serve different parts of AI growth opportunities. Software company Palantir (PLTR) specialises in generating data and AI-powered insights for defence, governments, and large enterprises. Palantir’s stock has soared 311.85% in 2024 with revenue up 24% YOY. While Wall Street analysts are ‘torn’ on Palantir’s estimated future earnings, they place them in the range of between a 19% to 48% EPS increase. 

Trump vs semiconductors. 🥊 Despite Trump ‘attacking’ Biden’s CHIPS Act 2022 during his campaign trail — the Act that provides local incentives to manufacture chips in the US and aims to restore the US’ ‘scientific and technological edge’ that took Apollo to the moon — it appears unlikely he’ll roll it back, Albright Stonebridge technology policy lead Paul Triolo told CNBC.

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