Last week, US chipmaker Nvidia became $184 billion more valuable – bringing it to the verge of a $1-trillion market capitalisation (mcap) – after blowing past Wall Street’s quarterly sales expectations largely due to a surge in demand for artificial intelligence (AI)

Nvidia projected quarterly revenue more than 50% above the average Wall Street estimates and said it could have more supply of AI chips in the second half to meet the demand. This prompted a 24% rally in stock price and one of the largest mcap jumps ever.

According to a Reuters report, Nvidia has strained to meet demand for its AI chips, with Tesla Inc Chief Executive Officer Elon Musk, who is reportedly building out an artificial-intelligence startup, earlier this week telling an interviewer that the graphics processing units (GPUs) are “considerably harder to get than drugs.”

But Nvidia chief executive officer Jensen Huang told Reuters the company had started full production of its latest AI chips in August last year, which gave it some buffer for supplies when chatbot apps exploded in popularity.

“In January, the new demand was incredibly steep,” Huang said. “We had to place additional orders, and we procured substantially more supply for the second half” of 2023.

AI boom & ChatGPT effect

The large computers that process data and power generative AI run on powerful chips called graphics processing units (GPUs). Nvidia produces about 80% of GPUs. OpenAI’s ChatGPT was created with thousands of Nvidia GPUs.

Nvidia’s main competitors include Advanced Micro devices (AMD’s stock, too, rallied 11%) and AI chips made in-house by companies like Amazon, Meta and Google.

Viral chatbot ChatGPT has made generative AI a buzzword this year. The tech uses pre-existing data to create new content – from poems to code.

Microsoft and Google have raced to add the tech to their search engines and productivity software as they seek to dominate the industry.

Nvidia, known for its chips used in games, pivoted to the data centre market over the last few years. Its business rapidly expanded during the pandemic even when gaming took off, cloud adoption surged and crypto enthusiasts turned to its chips for mining coins.

Consequently, data centre chips accounted for more than 50% of its revenue in the previous financial year.

More AI products

Huang unveiled a new batch of products and services tied to artificial intelligence, looking to further capitalise on a frenzy that has made his company the world’s most valuable chipmaker.

The wide-ranging new lineup includes an AI supercomputer platform called DGX GH200, which will help tech companies create successors to ChatGPT, Huang told the audience at the Computex show in Taiwan. Microsoft Corp., Meta Platforms Inc. and Alphabet Inc.’s Google are expected to be some of the first users of that equipment.

Nvidia also is teaming up with WPP Plc to use AI and the metaverse to lower the cost of producing advertising. It’s releasing a networking offering that’s designed to turbocharge the speed of information within data centres. And the company is even looking to change how people interact with video games: A service called Nvidia ACE for Games will use AI to enliven background characters and give them more personality.

(With inputs from agencies. Graphics & illustrations by Rahul Awasthi)

Stay on top of technology and startup news that matters. Subscribe to our daily newsletter for the latest and must-read tech news, delivered straight to your inbox.