The rise and rise of Nvidia

Long stories short

• Elon Musk met the Chinese foreign minister in Beijing on his first trip to the country since the pandemic.

• Apple’s supplier Foxconn said it would offer higher wages in a bid to recruit staff for iPhone 15 manufacturing.

• The UK government said it would investigate the music streaming industry over unfair payment for artists.

The rise and rise of Nvidia

Yesterday Nvidia became the first chipmaker to hit a trillion dollar valuation. In the past few days it has awed investors with revenue forecasts fifty per cent higher than analyst expectations.

Some now expect it to reach a $1.6 trillion market capitalisation – which would put it shoulder-to-shoulder with Alphabet, Google’s parent company.

So what? Nvidia is no dark horse. It is a titan of the technology industry and its unique position as a supplier to other artificial intelligence-obsessed corporations may see it overtake incumbent giants like Alphabet, Microsoft, Amazon and Meta.

The company has recently reframed itself as a “world leader in artificial intelligence computing” after years of corporate focus on “GPU-accelerated computing” with expertise in gaming and other graphics-intensive applications.

But large language models are about to change the world, says Sean Williams, CEO of UK-based artificial intelligence company, AutoGenAI.

“They require a lot of chips to do the matrix multiplication that sits at the heart of the maths that powers them,” he said. “Nvidia makes those chips. So Nvidia is going to do very, very well over the next few years.”

The rise and rise of Nvidia signals a shift in the sector away from software development to infrastructure (including computer chips) and service provision.

Jensen Huang, Nvidia’s CEO, said as much this week. “There’s no question we’re now in a new computing era,” Huang stated, explaining that artificial intelligence had reduced the “digital divide” so “everyone is a programmer now.”

Models like OpenAI’s Codex and GitHub Copilot, among many others, can write code from plain text prompts, faster and more accurately than most humans.

As artificial intelligence models with superhuman coding abilities reach the market, Huang has positioned Nvidia as the substrate for a world in which intensive programming is no longer a bottleneck and where compute power (in which Nvidia is a dominant global player) is the key factor.

Nvidia is already a crucial hardware provider to Microsoft, Amazon, Meta, OpenAI and many others. In the past few years it has

provided 2,000 A100 processing units to Meta for its Research SuperCluster;
built a huge, Azure-based, supercomputing service with Microsoft;
sold as many as 10,000 (more advanced) V100 processing units to OpenAI to train its GPT models; and
partnered with Amazon to provide 20,000 (even more advanced) H100 processing units for artificial intelligence computing services.

Nvidia is everywhere. Its main rivals – TSMC, Intel and AMD – have not struck deals of similar size or significance in the artificial intelligence field. Nvidia is just starting to explore the market for national-level supercomputing infrastructure.

It recently announced Israel-1 – a supercomputer project for the country’s fast-growing artificial intelligence businesses – and outbid rivals like Intel and AMD to provide computing hardware for the UK’s University of Bristol.

Other things to watch out for:

Nvidia providing capabilities for video game characters to respond in unique, personalised ways as real-time chatbots; and
the creation of real-time adverts with personalised content, as planned in collaboration with advertising giant WPP.

Problems? The semiconductor industry has not yet solved its material sustainability problem. Nvidia only sources 38 per cent of its electricity use from renewable sources and does not account for the downstream emissions from the use of its processors.

One senior artificial intelligence policy executive told Tortoise: “As the demand for powerful foundation models grows, the sector is demanding an unfeasible amount of energy. It can’t keep scaling at this rate.”

Nvidia is reshaping the balance of power in the global technology sector. As the demand for artificial intelligence applications continues to swell, it is likely to further cement its dominance.

Apple

Peer pressure
Members of the House of Lords have highlighted loopholes in Apple’s age suitability controls that allow minors to access gambling and dating apps. The Times reports that “wild hookup” and “anonymous chatroom” are available to underaged users due to mismatched ratings labels on the store. Apple appears to age-rate some apps lower than the terms and conditions of the apps themselves. TikTok, for example, is labelled as a 12+ app, while the company itself says the platform is intended for users aged 13 and older. A group of peers announced plans to force companies to tighten their age-restriction policies by amending the forthcoming Online Safety Bill, but their recommendations were thrown out on the basis that the bill was already severely delayed and changes would set it back further.

Microsoft

Appeal
Microsoft has filed an appeal against the Competition and Markets Authority’s decision to block its purchase of Activision Blizzard in the UK. The company claims that the regulator made “fundamental errors” in its assessment of the market impact of the deal, and did not fully consider the fact that cloud gaming is not an entirely separate market to “native gaming” i.e. games loaded and played on specific consoles. Long story short: Microsoft thinks that the CMA misrepresented the flexibility of cloud gaming and therefore the cost to gamers in terms of the choice they have in buying and streaming games. The European Commission was satisfied with the argument. 19 June is the deadline for any more submissions to be made in appeal.

Tencent

miHoYo
Tencent is the dominant player in China’s gaming sector – but it does face challenges from other developers in the country from time to time. miHoYo is one such challenger. Its first major title, Genshin Impact, was big business. It made $4.8 billion in revenue from mobile purchases – mostly as players bought in-game items and features – and will be followed by Honkai: Star Rail this year. As the cooling effects of the Chinese government’s restrictions on the gaming sector begin to thaw, the opportunity for new businesses to challenge incumbents like Tencent and NetEase could emerge. For now, miHoYo is still a minnow in a $60 billion pond.

Google

No more Stories
Google’s YouTube is driving content creators to make more short-form video by removing a long-standing feature. YouTube Stories is being phased out of the platform, with users unable to add new content in that form after 23 June. Stories are a series of videos linked to a channel that remain for seven days before automatically disappearing. The platform recommends turning to YouTube Shorts as an alternative. Shorts are the content type that competes most directly with TikTok videos as both share the same vertical orientation and time-scale. The announcement could be viewed as an effort by YouTube to divert more content into competition with the Chinese platform.

Amazon

Term time
At Amazon’s warehouses, people with children to look after will be able to work only during school term time. Amazon said the new contracts will guarantee time off during school holidays, including six weeks in the summer and two weeks over Easter and Christmas. This comes as part of the company’s ongoing dispute over pay and conditions with GMB – the UK’s general trade union – which has been leading a 16-day strike at Amazon’s warehouses in Coventry since January (the first ever industrial action against Amazon UK), asking for an hourly wage increase to £15. While flexible work is welcome, Amazon will have to provide wages above the “poverty pay” to more effectively encourage people back to work.

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Luke Gbedemah