Tag: market share of about 92%

Intel's $8.5 Billion Gamble: Can It Rival Nvidia?

Posted on by The INO.com Team

Intel Corporation (INTC), a leading player in the semiconductor industry, is making headlines with its ambitious plans to transform its operations, spurred by a substantial $8.5 billion boost from the CHIPS and Science Act. The roughly $280 billion legislative package, signed into law by President Joe Biden in 2022, aims to bolster U.S. semiconductor manufacturing and research and development (R&D) capabilities.

CHIPS Act funding will help advance Intel’s commercial semiconductor projects at key sites in Arizona, New Mexico, Ohio, and Oregon. Also, the company expects to benefit from a U.S. Treasury Department Investment Tax Credit (ITC) of up to 25% on over $100 billion in qualified investments and eligibility for federal loans up to $11 billion.

Previously, CHIPS Act funding and INTC announced plans to invest more than $1100 billion in the U.S. over five years to expand chipmaking capacity critical to national security and the advancement of cutting-edge technologies, including artificial intelligence (AI).

Notably, Intel is the sole American company that both designs and manufactures leading-edge logic chips. Its strategy focuses on three pillars: achieving process technology leadership, constructing a more resilient and sustainable global semiconductor supply chain, and developing a world-class foundry business. These goals align with the CHIPS Act’s objectives to restore manufacturing and technological leadership to the U.S.

The federal funding represents a pivotal opportunity for INTC to reclaim its position as a chip manufacturing powerhouse, potentially rivaling giants like NVIDIA Corporation (NVDA) and Advanced Micro Devices, Inc. (AMD).

Intel’s Strategic Initiatives to Capitalize on AI Boom

At Computex 2024, INTC introduced cutting-edge technologies and architectures that are well-poised to significantly accelerate the AI ecosystem, from the data center, cloud, and network to the edge and PC.

The company launched Intel® Xeon® 6 processors with E-core (Efficient-core) and P-core (Performance-core) SKUs, delivering enhanced performance and power efficiency for high-density, scale-out workloads in the data center. The first of the Xeon 6 processors debuted is the Intel Xeon 6 E-core (code-named Sierra Forest), available beginning June 4. Further, Xeon 6 P-cores (code-named Granite Rapids) are expected to launch next quarter.

Beyond the data center, Intel is expanding its AI footprint in edge computing and PCs. With over 90,000 edge deployments and 200 million CPUs distributed across the ecosystem, the company has consistently enabled enterprise choice for many years. INTC revealed the architectural details of Lunar Lake, the flagship processor for the next generation of AI PCs.

Lunar Lake is set to make a significant leap in graphics and AI processing capabilities, emphasizing power-efficient compute performance tailored for the thin-and-light segment. It promises up to a 40% reduction in System-on-Chip (SoC) power3 and over three times the AI compute8. It is scheduled for release in the third quarter of 2024, in time for the holiday shopping season.

Also, Intel unveiled pricing for Intel® Gaudi® 2 and Intel® Gaudi® 3 AI accelerator kits, providing high performance at up to one-third lower cost compared to competitive platforms. A standard AI kit, including Intel Gaudi 2 accelerators with a UBB, is offered to system providers at $65,000. Integrating Xeon processors with Gaudi AI accelerators in a system presents a robust solution to make AI faster, cheaper, and more accessible.

Intel CEO Pat Gelsinger said, “Intel is one of the only companies in the world innovating across the full spectrum of the AI market opportunity – from semiconductor manufacturing to PC, network, edge and data center systems. Our latest Xeon, Gaudi and Core Ultra platforms, combined with the power of our hardware and software ecosystem, are delivering the flexible, secure, sustainable and cost-effective solutions our customers need to maximize the immense opportunities ahead.”

On May 1, INTC achieved a significant milestone of surpassing 500 AI models running optimized on new Intel® Core™ Ultra processors due to the company’s investment in client AI, the AI PC transformation, framework optimizations, and AI tools like OpenVINO™ toolkit. These processors are the industry’s leading AI PC processors, offering enhanced AI experiences, immersive graphics, and optimized battery life.

Solid First-Quarter Performance and Second-Quarter Guidance

During the first quarter that ended March 30, 2024, INTC’s net revenue increased 8.6% year-over-year to $12.72 billion, primarily driven by growth in its personal computing, data center, and AI business. Revenue from the Client Computing Group (CCG), through which Intel continues to advance its mission to bring AI everywhere, rose 31% year-over-year to $7.50 billion.

Furthermore, the company’s non-GAAP operating income was $723 million, compared to an operating loss of $294 million in the previous year’s quarter. Its non-GAAP net income and non-GAAP earnings per share came in at $759 million and $0.18, compared to a net loss and loss per share of $169 million and $0.04, respectively, in the same quarter of 2023.

For the second quarter of fiscal 2024, Intel expects its revenue to come between $12.5 billion and $13.5 billion, and its non-GAAP earnings per share is expected to be $0.10.

Despite its outstanding financial performance and ambitious plans, INTC’s stock has plunged more than 38% over the past six months and nearly 40% year-to-date.

Competing with Nvidia: A Daunting Task

Despite INTC’s solid financial health and strategic moves, the competition with NVDA is fierce. Nvidia’s market performance has been stellar lately, driven by its global leadership in graphics processing units (GPUs) and its foray into AI and machine learning markets. The chip giant has built strong brand loyalty among developers and enterprise customers, which could be challenging for Intel to overcome.

Over the past year, NVIDIA has experienced a significant surge in sales due to high demand from tech giants such as c, Alphabet Inc. (GOOGL), Microsoft Corporation (MSFT), Meta Platforms, Inc. (META), and OpenAI, who invested billions of dollars in its advanced GPUs essential for developing and deploying AI applications.

Shares of the prominent chipmaker surged approximately 150% over the past six months and more than 196% over the past year. Moreover, NVDA’s stock is up around 2,938% over the past five years. Notably, after Amazon and Google, Nvidia recently became the third U.S. company with a market value surpassing $3 trillion.

As a result, NVDA commands a dominant market share of about 92% in the data center GPU market. Nvidia’s success stems from its cutting-edge semiconductor performance and software prowess. The CUDA development platform, launched in 2006, has emerged as a pivotal tool for AI development, with a user base exceeding 4 million developers.

Bottom Line

Proposed funding of $8.5 billion, along with an investment tax credit and eligibility for CHIPS Act loans, are pivotal in Intel’s bid to regain semiconductor leadership in the face of intense competition, particularly from Nvidia. This substantial federal funding will enhance Intel’s manufacturing and R&D capabilities across its key sites in Arizona, New Mexico, Ohio, and Oregon.

While INTC possesses the resources, technological expertise, and strategic vision to challenge NVDA, the path forward is fraught with challenges. Despite Intel’s recent strides in the AI ecosystem, from the data center to edge and PC with products like Xeon 6 processors and Gaudi AI accelerators, Nvidia’s dominance in data center GPUs remains pronounced, commanding a significant market share.

Future success will depend on Intel’s ability to leverage its strengths in manufacturing, introducing innovative product lines, and cultivating a compelling ecosystem of software and developer support. As Intel advances its ambitious plans, industry experts and stakeholders will keenly watch how these developments unfold, redefining the competitive landscape in the AI and data center markets.

The Future of NVIDIA: Post-Split Valuation and Growth Projections

Posted on by The INO.com Team

NVIDIA Corporation (NVDA), a prominent force in the AI and semiconductor technology industries, announced a 10-for-1 forward stock split of the company’s issued common stock during its last earnings release in May. Shareholders of record as of June 6 received nine additional shares for each share held after the close on Friday, June 7. Trading will commence on a split-adjusted basis at market open on June 10.

This strategic move is poised to reshape the landscape for Nvidia investors and the broader tech market.

Post-Split Valuation

NVDA was already a leading AI stock in the market, but investor interest in the chipmaker skyrocketed as its 10-for-1 stock split took effect after the market’s close on June 7. Shares of the hottest stock on the S&P 500 surged tenfold on Friday following its much-anticipated stock split.

Moreover, NVIDIA’s stock has gained more than 158% over the past six months and nearly 222% over the past year. Notably, the stock is up over 3,222% over the past five years. During this remarkable run, Nvidia’s market cap of around $3 trillion surpassed those of Amazon (AMZN) and Alphabet Inc. (GOOGL). Before the 10-for-1 split, the stock traded at a lofty $1,209.

The chip giant’s strategic decision to split its stock follows a broader trend among tech giants to make their stock ownership more affordable and appealing to retail investors. With more individual investors gaining access to Nvidia’s shares post-split, increased trading activity and demand are observed, potentially driving share prices higher.

According to data from BofA research, total returns for companies announcing stock splits are about 25% in the 12 months after a stock split historically versus 12% gains for the S&P 500. Thus, stock splits are seen as a bullish signal, often accompanied by positive investor sentiment and increased buying activity.

Solid Earnings And A Healthy Outlook

The stock split isn’t the only reason for NVDA’s latest bull run. The company also reported better-than-expected revenue and earnings in the fiscal 2025 first quarter, driven by robust demand for its AI chips. During the quarter that ended April 28, 2024, Nvidia’s revenue rose 262% year-over-year to $26.04 billion. That surpassed the consensus revenue estimate of $24.59 billion.

The company’s largest business segment, Data Center, which includes its AI chips and several additional parts required to run big AI servers, reported a record revenue of $22.60 billion, up 427% year-over-year.

“Our data center growth was fueled by strong and accelerating demand for generative AI training and inference on the Hopper platform. Beyond cloud service providers, generative AI has expanded to consumer internet companies, and enterprise, sovereign AI, automotive and healthcare customers, creating multiple multibillion-dollar vertical markets,” said Jensen Huang, founder and CEO of NVDA.

“We are poised for our next wave of growth. The Blackwell platform is in full production and forms the foundation for trillion-parameter-scale generative AI,” Huang added. During a call with analysts, the CEO mentioned that there would be significant Blackwell revenue this year and that the new chip would be deployed in data centers by the fourth quarter.

The chipmaker’s non-GAAP gross profit grew 328.2% from the previous year’s quarter to $20.56 billion. NVDA’s non-GAAP operating income was $18.06 billion, an increase of 491.7% year-over-year. Its non-GAAP net income rose 461.7% year-over-year to $15.24 billion. Also, it posted a non-GAAP EPS of $6.12, compared to analysts’ estimate of $5.58, and up 461.5% year-over-year.

Furthermore, NVIDIA’s cash, cash equivalents and marketable securities were $31.44 billion as of April 28, 2024, compared to $25.98 billion as of January 28, 2024.

According to its outlook for the second quarter of 2025, the company expects revenue to be $28 billion, plus or minus 2%. Its non-GAAP gross margin is expected to be 75.5%, plus or minus 50 basis points. NVDA’s non-GAAP operating expenses are anticipated to be approximately $2.8 billion.

Raised Dividends

NVDA raised its dividend payouts to reward shareholders and demonstrate confidence in its financial strength and growth prospects. The company increased its quarterly cash dividend by 150% from $0.04 per share to $0.10 per share of common stock. The dividend is equivalent to $0.01 per share on a post-split basis and will be paid on June 28 to all shareholders of record on June 11.

While Nvidia's dividend yield is modest compared to its tech peers, its considerable cash flow and strong balance sheet provide ample room for growth.

Dominance in AI and Data Center Markets Fuels Unprecedented Growth Opportunities

NVDA is strategically positioned at the forefront of the AI and data center markets, with a high demand for AI chips for data processing, training, and inference from large cloud service providers, GPU-specialized ones, enterprise software, and consumer internet companies. In addition, vertical industries, led by automotive, financial services, and healthcare, drive the demand.

Statista projects the generative AI (GenAI) market to reach $36.06 billion in 2024, with the U.S. accounting for the largest market size of $11.66 billion. Further, the GenAI market is expected to total $356.10 billion by 2030, expanding at a CAGR of 46.5% from 2024 to 2030.

Over the past year, Nvidia has experienced a significant surge in sales due to robust demand from tech giants like Google, Microsoft Corporation (MSFT), Meta Platforms, Inc. (META), Amazon, and OpenAI, who invested billions of dollars in Nvidia’s advanced GPUs essential for developing and deploying AI applications. In January, META announced a sizable order of 350,000 high-end H100 graphics cards from Nvidia.

As a result, NVDA holds a market share of about 92% in the data center GPU market for generative AI applications.

Bottom Line

NVDA’s recent 10-for-1 stock split has significantly impacted its valuation and market appeal. This strategic move not only made Nvidia's shares more accessible to retail investors but also fueled increased trading activity and demand, driving share prices higher. The stock surged tenfold on Friday when the stock split took effect, reflecting the heightened investor interest.

NVIDIA's strong financial performance, as evidenced by the fiscal 2025 first quarter report, further solidifies its position in the AI and data center market. The company reported threefold revenue growth, driven by the massive demand for its AI processors from major tech companies, including Microsoft, Meta, Amazon, Google, and OpenAI.

The chipmaker’s remarkable growth has propelled it to the third-largest market capitalization globally, surpassing peers such as AMZN and META.

Further, the company’s revenue and EPS for the fiscal year ending January 2025 are expected to grow 97.9% and 108.9% year-over-year to $120.55 billion and $27.07, respectively. For the fiscal year 2026, Analysts expect its revenue and EPS to increase 32.4% and 32.6% from the prior year to $159.55 billion and $35.90, respectively. With a healthy outlook for the future, NVDA continues to attract investors looking for long-term growth opportunities.

Moreover, the recent decision to raise dividends by 150% showcases NVDA's confidence in its financial strength and growth prospects, making it more attractive to income-oriented investors. This move, coupled with the stock split, appeals to different investor demographics and reflects NVDA's commitment to rewarding shareholders while positioning itself for future growth in the AI and semiconductor sectors.

Why Nvidia’s Stock Split Could Drive Further Market Gains

Posted on by The INO.com Team

NVIDIA Corporation (NVDA) shares topped a record high of $1000 in a post-earnings rally. Last week, the company reported fiscal 2025 first-quarter results that beat analyst expectations for revenue and earnings, reinforcing investor confidence in the AI-driven boom in chip demand. Moreover, the stock has surged nearly 120% over the past six months and more than 245% over the past year.

Meanwhile, the chipmaker announced a 10-for-1 forward stock split of NVIDIA’s issued common stock, making stock ownership more accessible to employees and investors.

Let's delve deeper into how NVIDIA’s stock split decision could attract more investors and propel future gains.

The AI Chip Leader

NVDA’s prowess in AI and semiconductor technology has been nothing short of remarkable. Its GPUs (Graphics Processing Units) have become synonymous with cutting-edge AI applications, from powering self-driving cars and training and deploying LLMs to revolutionizing healthcare diagnostics and e-commerce recommendation systems.

Amid a rapidly evolving technological landscape, NVIDIA has consistently remained at the forefront, driving innovation and redefining industry standards. Led by Nvidia, the U.S. dominates the generative AI tech market. ChatGPT’s launch in November 2022 played a pivotal role in catalyzing the “AI boom.”

NVDA holds a market share of about 92% in the data center GPU market for generative AI applications. The company’s chips are sought after by several tech giants for their diverse applications and high performance, including Amazon (AMZN), Meta Platforms, Inc. (META), Microsoft Corporation (MSFT), Alphabet Inc. (GOOGL), and Tesla, Inc. (TSLA).

Nvidia surpassed analyst estimates for revenue and earnings in the first quarter of fiscal 2025, driven by robust demand for its AI chips. In the first quarter that ended April 28, 2024, NVIDIA’s revenue rose 262% year-over-year to $26.04 billion. That topped analysts’ revenue expectations of $24.59 billion. The company reported a record revenue from its Data Center segment of $22.60 billion, up 427% from the prior year’s quarter.

“Our data center growth was fueled by strong and accelerating demand for generative AI training and inference on the Hopper platform. Beyond cloud service providers, generative AI has expanded to consumer internet companies, and enterprise, sovereign AI, automotive and healthcare customers, creating multiple multibillion-dollar vertical markets,” said Jensen Huang, founder and CEO of NVDA.

“We are poised for our next wave of growth. The Blackwell platform is in full production and forms the foundation for trillion-parameter-scale generative AI,” Huang added. 

NVDA’s non-GAAP gross profit grew 328.2% from the year-ago value to $20.56 billion. The company’s non-GAAP operating income was $18.06 billion, an increase of 491.7% from the prior year’s quarter. Its non-GAAP net income rose 461.7% year-over-year to $15.24 billion.

Furthermore, the chipmaker reported non-GAAP EPS of $6.12, compared to the consensus estimate of $5.58, and up 461.5% year-over-year.

Nvidia’s Stock Split: A Strategic Move

Alongside an outstanding fiscal 2025 first-quarter earnings, NVDA announced a 10-for-1 stock split of its issued common stock. Nvidia’s decision to split its stock aligns with a broader trend among tech giants to make their shares more appealing to a wider range of investors, particularly retail investors. The chipmaker aims to democratize ownership and attract a vast investor base by breaking down the barrier of high share prices.

As more individual investors gain access to Nvidia’s shares post-stock split, we could see heightened trading activity and increased demand, potentially exerting upward pressure on its share prices. This strategic move reflects the confidence of NVIDIA’s management in its future growth trajectory and underscores its commitment to inclusivity in the investment landscape.

Bank of America analysts, led by Jared Woodward, head of the bank’s research investment committee, described the share split as “another large-cap tech pursuing shareholder-friendly policies” in a note to clients.

NVIDIA marks the fourth Magnificent Seven big tech companies to announce a stock split since 2022, following Google, Amazon, and Tesla’s efforts to make shares more accessible, according to Woodward and his team.

In recent years, as the share prices of several Big Tech companies surged past the $500 mark, it has become challenging for retail investors to buy shares. Consequently, these companies have been exploring ways to simplify the process for nonprofessional investors to buy in. BofA added, “Big Tech is going bite-sized” to lure retail investors, which might signal more market-beating returns.

Historical Data Suggests That Stock Splits Indicate a Bullish Outlook

Examining historical data on stock splits reveals a generally positive picture. While immediate post-split gains aren’t guaranteed, companies like Apple Inc. (AAPL) and Google have witnessed substantial appreciation in their share prices following splits. AAPL’s 4-for-1 stock split, which took effect in August 2020, primarily influenced investor sentiment and trading dynamics.

Following the split, Apple’s stock continued its upward trajectory, driven by solid performance in its core businesses, including iPhone sales, services revenue, and wearables. Throughout the latter half of 2020 and into 2021, its share price experienced significant appreciation, reaching new all-time highs.

Given NVIDIA’s robust fundamentals and leadership in AI and semiconductor technology, there’s reason to believe that its recent stock split could lead to similar outcomes.

BofA’s sell-side analysts have consistently been bullish on Nvidia shares, and following the first-quarter earnings release, they raised their lofty 12-month price target for the chip giant from $1,100 to $1,320. If the outlook proves accurate, Nvidia shares could surge by another 26%, and the stock split could support that bullish move, as per Bank of America’s reading of history.

“Splits have boosted returns in every decade, including the early 2000s when the S&P 500 struggled,” noted Woodard and his team. BofA’s research indicates that stocks have delivered 25% total returns within the 12 months following a stock split historically, compared to the S&P 500’s 12%.

Further, the bank highlighted that stock splits often ignite bullish runs, even in stocks that have been underperforming. For example, both Advanced Micro Devices, Inc. (AMD) and Valero Energy Corporation (VLO) experienced significant share price increases after announcing stock splits despite their prior poor performance. According to analysts, “Since gains are more common and larger than losses on average, splits appear to introduce upside potential into markets.”

However, it's essential to heed the standard caveat the Securities and Exchange Commission (SEC) provided: “Past performance is not indicative of future results.” In line, Bank of America emphasized that “outperformance is no guarantee” after a stock split. Companies still witness negative returns 30% of the time following a split, with an average decline of 22% over the subsequent 12 months.

The analysts noted, “While splits could be an indication of strong momentum, companies can struggle in a challenging macro environment.” They pointed to companies like Amazon, Google, and Tesla that faced difficulties in the 12 months following their stock splits in 2022 due to a high interest-rate environment.

Bottom Line

NVDA has a significant role as a global leader in AI and semiconductor technology, with its GPUs driving innovations across numerous industries, such as tech, automobile, healthcare, and e-commerce. Nvidia’s fiscal 2025 first-quarter results suggest that demand for its AI chips remains robust.

Statista projects the global generative AI market to reach $36.06 billion in 2024. This year, the U.S. is expected to maintain its position as the leader in AI market share, with a total of $11.66 billion. Further, the market is estimated to grow at a CAGR of 46.5%, resulting in a market volume of $356.10 billion by 2030. The AI market’s bright outlook should bode well for NVDA.

The company also recently made headlines with its announcement to undergo a 10-for-1 stock split. While stock splits generally do not change the fundamental value of a company, they make its shares more accessible and attractive to retail investors. So, the recent stock split could significantly increase retail participation, driving heightened trading activity and potentially exerting upward pressure on Nvidia’s share prices.

Historically, stock splits generally indicate a positive impact on stock performance. Companies like AAPL, GOOGL, and AMD experienced substantial price appreciation after stock splits, with enhanced accessibility to retail investors driving higher demand and liquidity.

However, it is crucial to acknowledge that past performance is not indicative of future results. While stock splits can signal strong price momentum, they do not guarantee outperformance.

In conclusion, Nvidia’s stock split will likely attract more retail investors, potentially boosting increased trading activity and stock price appreciation. Coupled with the company’s strong position in the AI and semiconductor markets, the stock split could facilitate further growth, aligning with historical trends of positive post-split performance.