Markets are growing increasingly carefree about valuations. Nvidia (NVDA) added 37.86% in the last month and doubled its stock price in the last year. Supercomputer supplier Super Micro Computer (SMCI) fared even better. Shares are up 719% in the last year.
For now, market watchers may ignore valuations. Bullish sentiment remains in the overbought territory. However, Nvidia is building its business to capture the addressable market. The firm is reportedly setting up a new business unit to capture the custom chip market in cloud computing. After cloud supplier Cloudflare (NET) gained 19.5% last Friday, Feb. 9, when it posted strong results, Nvidia needs to sustain its competitive edge.
Nvidia must advance AI processors so that it meets strong demand from its customers. This includes Microsoft (MSFT), whose CoPilot AI runs on ChatGPT. Alphabet (GOOG) recently renamed Bard AI to Gemini. It will charge a monthly fee. Meta Platforms (META) is pivoting its metaverse into generative AI.
Nvidia’s customers will want more than its general H100 and A100 semiconductors. It needs specialized, custom-developed chips. By entering this market, it will compete directly with Marvell Technology (MRVL) and Broadcom (AVGO).
Your Takeaway
Nvidia cracked the mainstream market of AI chip supply. It faces virtually no competition. AMD is hardly a threat, either. When it posts results in two weeks, the firm may issue a bullish outlook at pleases its shareholders.
