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Earnings are strong! Nvidia's stock price has doubled this year, and the AI boom is heading towards a trillion-dollar market value
Source: The Paper
Reporter Shao Wen
Nvidia released its financial report for the first quarter of fiscal year 2024, with revenue of US$7.19 billion, a 19% increase from the previous month, more than half of which came from its data center business, which hit a record high. Nvidia shares soared 25% in after-hours trading, valuing the company at more than $950 billion and heading towards a rare $1 trillion.
“The computer industry is going through two transformations at the same time—accelerated computing and generative AI. As companies race to apply generative AI to every product, service, and business process, a trillion dollars’ worth of installed global data The central infrastructure will transition from general-purpose computing to accelerated computing."
On May 25, Beijing time, Nvidia released its financial report for the first quarter of fiscal year 2024 as of April 30, with revenue of US$7.19 billion, higher than market expectations of US$6.52 billion, and a decrease of 13% compared with US$8.288 billion in the same period last year. %, an increase of 19% compared with the previous quarter's $6.051 billion.
Divided by business sector, Nvidia's gaming business revenue in the first quarter was US$2.24 billion, a decrease of 38% compared with the same period last year, but an increase of 22% compared with the previous quarter. Data Center revenue was a record $4.28 billion, up 14% year-over-year and 18% quarter-over-quarter. Professional Visualization revenue was $295 million, a decrease of 53% compared to the same period last year, but an increase of 31% compared to the previous quarter. Automotive revenues were $296 million, an increase of 114% year-over-year and 1% quarter-over-quarter.
It is worth noting that Nvidia’s revenue outlook for the second quarter of fiscal 2024 is $11 billion (plus or minus 2%), a year-on-year increase of approximately 32.7%, which is 53.2% higher than analysts’ expectations.
That seemed to spark investor enthusiasm for its stock, with Nvidia shares soaring 25% in after-hours trading, adding nearly $200 billion in market value and taking Nvidia's valuation to more than $950 billion, heading towards a rare $10,000 100 million U.S. dollars, ranking among the top five in the U.S. stock market. Nvidia stock has more than doubled so far this year.
"Given the generative AI 'gold rush' that is taking place right now, this should boost demand for Nvidia chips for the rest of the year," said Edward Jones analyst Logan Purk.
Nvidia's suppliers are also reaping the rewards. TSMC, which makes Nvidia chips, rose 3.8 percent in Taipei, equipment supplier Advantest soared 20 percent to a record high in Tokyo, while memory chip maker SK Hynix rose 6.8 percent in Seoul.
AI promotes data center business hurricane
In this financial report, the revenue of the data center business is the most eye-catching. It is worth noting that data centers have replaced games as Nvidia's largest source of revenue, accounting for nearly 60%. Gaming has previously accounted for more than half of Nvidia's revenue. The "hurricane" of the data center business has benefited from ChatGPT detonating the generative AI market.
Nvidia founder and CEO Huang Renxun said in the financial report, "The computer industry is undergoing two transformations at the same time-accelerated computing and generative AI. As companies compete to apply generative artificial intelligence to every product, service and business process, The $1 trillion installed global data center infrastructure will transition from general-purpose computing to accelerated computing."
In simple terms, operators of big data centers are restructuring their computing infrastructure to better respond to the opportunities presented by artificial intelligence, which has brought about a surge in demand for chips.
It is worth noting that Nvidia's data center business has repeatedly surpassed its gaming business. More than half of Nvidia's revenue this quarter came from its record high data center business (mainly referring to Nvidia's accelerated computing platform built on three next-generation architectures: GPU, DPU, and CPU).
Huang Renxun revealed that now the entire data center product line-H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand and BlueField-3 DPU-are in production and are increasing their supply significantly to meet the surge in demand.
In an interview with Reuters, Huang said Nvidia had started full production of its latest AI chips last August, giving it some cushion of supply as chatbot apps take off. "In January, new demand surged and we had to place additional orders, and we sourced more supply for the second half of 2023."
"We expect this sequential growth to be primarily driven by data centers, reflecting a dramatic increase in demand related to generative artificial intelligence and large language models," said Nvidia Chief Financial Officer Colette Kress. Further surges will extend well beyond this quarter.
After the birth of ChatGPT, the demand for high-computing GPUs also soared. The two AI chips, A100 and H100, are the core power of large language models like ChatGPT. ChatGPT alone uses tens of thousands of Nvidia A100s.
Amir Anzadeh, a strategist at Asymmetric Advisors in Singapore, analyzed that "the orders for Nvidia's A100 and H100 AI chips are very impressive." Zadeh believes that TSMC's pricing is still reasonable, with a price-to-earnings ratio of about 16 this year. Times, while Nvidia's price-earnings ratio is close to 70 times.
GPU panic buying pushes up the price of Nvidia chips
In early April, shortly after calling for a moratorium on artificial intelligence research, Tesla CEO Elon Musk established an AI model company X.AI and bought 10,000 GPUs. He said at the time that "even dogs are Grab the GPU". On May 24, Musk said in an interview with Reuters, "It is much more difficult to obtain a graphics processing unit (GPU) than to obtain drugs."
Domestically, because the United States banned the sale of high-end AI chips to China, Chinese companies hoping to participate in this wave of AI boom can only buy A800 and H800, which are currently priced at 40% more than the original suggested retail price. %, the price of the A800 is about 36,500 US dollars, and the delivery time of the latest order is even more than 6 months.
According to IDC data, the compound growth rate (CAGR) of China's intelligent computing power scale will reach 52.3% in the next five years. Among AI chips, GPU occupies the main market size. In the domestic artificial intelligence chip market in 2022, GPU chips will account for 89.0% of the market. Compared with other AI chips, GPU is more suitable for complex mathematical calculation scenarios and supports highly parallel workloads.
Nvidia is the undisputed ruler of the GPU market. According to the GPU market statistics report released by Jon Peddie Research, Nvidia’s PC GPU shipments in 2022 will reach 30.34 million units, which is nearly 4.5 times that of AMD; as of the fourth quarter of 2022, Nvidia will occupy 84% of the independent GPU market. market share.
However, Huang Renxun emphasized that the competition for the supply of AI chips is very fierce. According to rough statistics, the three companies Microsoft, Google, and Amazon have launched or plan to release 8 server and AI chips. Meta, which has been clinging to CPUs before, is also accelerating the development of GPUs. (For details, see The Paper's report "Ending Nvidia's rule? Global technology giants are deploying self-developed AI chips")
"We face competition from all directions, from mature semiconductor companies to start-up companies. So in order to better compete in the market, in addition to providing chips to customers, Nvidia has turned to selling the entire AI supercomputing system to large companies." Huang Renxun explain.
NVIDIA'S "WAY TO A WINNER"
In addition to data centers, Nvidia's other two business segments: professional visualization and autonomous driving have a large market space in the future, because metaverse and autonomous driving both represent emerging technologies in the future. From blockchain, autonomous driving, metaverse to generative AI, Nvidia seems to be stepping on the wave of technology every time, laying out in time and leading the market.
According to the analysis of Nvidia's "Winner's Road" by Zhongtai Securities Research Institute, in 2005, AMD's R&D expenses were 1.1 billion US dollars, about 3.2 times that of Nvidia, and by 2022, Nvidia's R&D expenses reached 7.34 billion US dollars, It is 1.47 times that of AMD. With the continuous growth of research and development investment, Nvidia has reduced costs and product prices through technological progress, and continuously launched new products to attract more consumers, and its advantages have gradually become prominent.
In terms of ecology, Nvidia launched the CUDA platform, which greatly reduces the difficulty of using GPU to train high-computing models such as neural networks, and expands the application of GPU from 3D games and image processing to scientific computing, big data processing, machine learning and other fields. The establishment of an ecosystem has made many developers rely on CUDA, further increasing Nvidia's competitive barriers
Recently, the development of artificial intelligence has brought more growth space for GPU. Nvidia has seized new opportunities for downstream development and launched AI accelerator cards. With the development of large generative AI models represented by ChatGPT, it has entered a rapid growth channel.
Adam Crisafulli, an analyst and founder of Vital Knowledge media, said, "In addition to the AI bringing huge revenue to the company, there is such a tailwind, Nvidia's gross margin has now basically recovered to the previous level. peak level."