Nvidia Stock Soars 8.15% as AI Chip Demand Heats Up and Export Prospects Improve

Nvidia (NVDA) saw its stock price rise by 8.15% on Wednesday, marking its largest single-day gain since August. Over the past three days, the stock has increased by 13.69%. CEO Jensen Huang stated that Nvidia's products have become the most sought-after items in the tech world, with customers scrambling for the limited supply. The high demand for the new AI chip, Blackwell, has left some customers frustrated due to limited production speed. Huang hinted that Nvidia might reduce its reliance on TSMC and shift to other chip manufacturers if necessary.

Huang made these comments during a tech conference in San Francisco, highlighting the robust demand for Blackwell. Currently, Nvidia outsources Blackwell production, and its suppliers are striving to keep pace with demand and making progress. Additionally, reports indicate that the U.S. government may allow Nvidia to export advanced chips to Saudi Arabia, aiding the nation's efforts to train and run powerful AI models. Officials from the Saudi Data and AI Authority are working to meet U.S. security requirements to expedite access to these chips.

Nvidia generates a substantial portion of its revenue from a few major customers, such as Microsoft's Azure and Meta Platforms Inc.'s data centers. When questioned about the return on the substantial AI investments, Huang emphasized that companies have no choice but to embrace accelerated computing. He explained that Nvidia's technology not only speeds up traditional workloads but also tackles AI tasks that legacy systems cannot handle.

Nvidia's heavy reliance on TSMC stems from its leading position in chip manufacturing. However, the company has internally developed much of the technology, enabling it to shift orders to other suppliers if needed. Huang cautioned that such a shift might compromise chip quality.

Following the announcement, Nvidia’s stock price shifted from a decline to a significant increase, peaking at over 6.5% intraday at $115.18. This boost also spurred the NASDAQ to shift from a 1.6% decline to a 1.46% increase. Nvidia's stock has more than doubled this year, surging by 239% in 2023.

Huang reflected on Nvidia's journey from a gaming GPU company to a comprehensive hardware and software supplier for data centers. He highlighted the company's ability to foresee and adapt to new computation forms capable of addressing challenges that general-purpose computing cannot. This leads to a focus on accelerated computing, which allows Nvidia to solve problems across various industries.

Huang also elaborated on the high-efficiency production process for AI chips, emphasizing the importance of maintaining a consistent architecture that evolves with technological advancements. He noted that this architecture compatibility, ongoing since the company's inception in 1993, has been crucial for the widespread adoption of Nvidia's CUDA platform.

Discussing the competitive landscape, Huang stressed that Nvidia's edge lies not just in its chips but in its comprehensive approach to AI infrastructure. The company's unified architecture crosses all cloud and on-premise platforms, ensuring that their software runs seamlessly across various systems.

Regarding supply chain concerns, Huang acknowledged the complexity and interconnectedness of the Asian supply chain network. While primarily relying on TSMC for manufacturing, Nvidia designs its products with diversity and redundancy to ensure continued supply despite potential disruptions.

In conclusion, Nvidia's strategy involves continuous innovation and addressing market demands while maintaining quality and adaptability in its supply chain. Despite the immense pressures and responsibilities, the company remains committed to advancing its technology and meeting the growing demands of the AI industry.