Nvidia’s Jensen Huang Predicts AI Factories Will Revolutionize Industry – NVIDIA (NASDAQ:NVDA) ‘Godfather Of GPU’ Nvidia’s Jensen Huang Predicts AI Factories Will Revolutionize Industry – NVIDIA (NASDAQ:NVDA)

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By Ronald Tech

Jensen Huang, famously known as the “Godfather of GPU,” envisions a future where “AI factories” will dominate the world, permeating every industry, company, and region.

What Happened: Nvidia Corp. (NASDAQ: NVDA) CEO Huang expressed unmitigated enthusiasm for the swift embrace of AI applications and accelerated computing, as his company boasts a commanding 70% market share of AI chips globally. Notably, Nvidia is forging the path with its development of what it dubs the “operating system of AI,” a venture that Huang believes could grow into a “very significant” business after the company’s software services segment achieved a $1 billion annualized revenue run rate during the fourth quarter.

Moreover, Nvidia reported fourth-quarter revenue of $22.1 billion, surpassing Street expectations of $20.62 billion, according to data from Benzinga Pro.

Huang’s vision of AI factories goes beyond abstraction. He contends that Nvidia’s AI chips have birthed an entirely new industry that transmutes raw data into immensely valuable tokens through AI supercomputers. These tokens materialize in the form of output produced by AI chatbots like OpenAI’s ChatGPT and Midjourney, which ordinary end users interact with.

Elaborating further, Huang explained, “All of these tokens are generated in a very specialized type of data center. And this data center we call AI supercomputers and AI generation factories.”

Why It Matters: Huang’s assertion underscores the arrival of AI factories, heralding an entirely new industry fueled by data. With Nvidia’s dominant 70% share in the AI chips sector, the Huang-led company is strategically positioned to propel the next industrial revolution globally.

Parallel to this, Huang has been advocating for “Sovereign AI,” urging nations to invest in and develop their own AI to reclaim ownership of their data.

See also  The Rise of Taiwan Semiconductor Manufacturing Company in the AI Chipmaker World Seizing the Chipmaker Crown

As Nvidia dances on the ceiling of the trillion-dollar club, another contender emerges in the AI chipmaking realm. While Broadcom has made strides in networking and AI accelerator chips, it's not the dark horse for the trillion-dollar congregation. Eyes turn to Taiwan Semiconductor Manufacturing Company (TSMC), waiting in the wings to ascend the throne.

Image source: Getty Images.

A Mighty Player in the Shadows

TSMC reigns supreme as the largest chip fabricator globally, commanding a lion's share of foundry spending. Armed with cutting-edge chip manufacturing prowess, boasting unmatched power efficiency and computational might, TSMC etches its mark in the AI landscape and beyond.

The company's colossal scale fosters a formidable advantage over competitors. Its robust revenue streams fuel relentless investments in research and development, ensuring TSMC stands at the vanguard of chip manufacturing innovation.

Driving Growth on the Semiconductor Highway

Painting a rosy future, TSMC anticipates a fruitful trajectory in the upcoming years. With third-quarter revenue forecasts standing tall at $22.4 billion to $23.2 billion, the company flaunts remarkable year-on-year growth figures. Additionally, a projected increase in gross margin signals pricing resilience amid escalating customer demands.

Amidst the backdrop of tech giants doubling down on AI infrastructure, such as Meta Platforms and Alphabet, TSMC stands poised to ride the crest of this technological wave. With an eye on pronounced capex expansions by industry behemoths, TSMC anticipates a windfall of demand for its chipsets.

Image source: Getty Images.

An air of anticipation looms over the tech sphere as the impending Apple iPhone release promises a host of new AI features. The allure of cutting-edge technology is expected to drive a surge in iPhone upgrades, propelling a ripple effect of chip demand, with TSMC positioned at the helm of this impending surge.

The Valuation Conundrum

Despite TSMC's colossal $875 billion market capitalization, its shares appear undervalued at current prices. Trading at a modest forward price-to-earnings ratio of 26.5, coupled with robust revenue growth and margin expansion, the company is forecasted to sustain earnings growth exceeding 20% annually. Analysts project a steady trajectory of 21.5% earnings growth per annum over the ensuing five years, painting a promising picture for investors.

Avoiding the Bandwagon: An Analysis of Taiwan Semiconductor Manufacturing

NVDA Price Action: Nvidia stock closed at $735.94, marking a remarkable 9.07% surge in the last 24 hours, within a 52-week range of $204 to $746, as per data from Benzinga Pro.