MAGGIE PAGANO: Chips are up for AI pioneer

Investors were running out of superlatives to describe the astonishing record results from Nvidia, the world’s leading AI chipmaker which recently made it to the planet’s exclusive Trillion Dollar club of six alongside Apple, Amazon, Alphabet, Microsoft and Saudi Arabia’s Aramco.

‘Stunning’, ‘remarkable’ and ‘blockbuster’ were just some of the adjectives used to hail quarterly results published in the US late on Wednesday.

They showed a doubling of sales and exploding profits, which lifted its share price to another record high.

To say that Wall Street has a crush on Nvidia is perhaps a little exaggeration.

Yet the tech giant has an almost fanatical fan base, with analysts hyping the stock so much that it has more than trebled in value this year, taking its valuation from less than £300billion to nearly £1trillion (and well over $1trillion in dollar terms) today.

Sign of the times: Nvidia argues that by stopping exports the US is holding back its domestic industry in the race to be the leading global AI superpower

It’s the only chipmaker in the world to have made it to this level, and is the top-returning share listed on the S&P 500.

Here’s another word to add to the list: ‘bellwether’ – the status Nvidia has in the US economy. It’s rare that the results of one company are considered as important to the future direction of financial markets as what US Federal Reserve chairman Jerome Powell has to say today at Jackson Hole.

Yet Nvidia’s role as a bellwether is exactly what top Wall Street punters have been claiming about its performance this week, arguing that a bullish one would be an important indicator of the prominence of AI in the tech sector, and therefore a good guide to confidence in the wider markets.

Nvidia came up trumps. Sales doubled to a record $13.5billion (£10.7billion) in the second quarter while net profit was $6.2billion (£4.9billion), smashing Wall Street’s wildest dreams. The bellwether struck the right note – Nvidia’s results set off a rally in global tech shares.

There’s more to come. The Santa Clara company says revenue will be higher still at $16billion (£12.7billion) in the next quarter. Nvidia boss Jensen Huang added that companies worldwide are now transitioning from general-purpose to accelerated computing and generative AI, and hailed the beginning of a new computing era.

Nvidia is at the forefront of this. It started out in the 1990s making computer chips to process graphics for 3D computer games. But more recently co-founder Huang has been hell-bent on adapting to AI.

Unlike rivals such as Intel and Micron Technologies, Nvidia’s focus has been on its data centre business, which includes making AI chips for all the world’s major artificial intelligence apps, including ChatGPT.

The strategy worked: it has around 95 per cent of the market for all machine learning.

Having such dominance, though, comes with problems, not least with China.

The US is looking at restricting Nvidia’s chip exports to China because of national security concerns.

Nvidia disagrees, arguing that by stopping exports the US is holding back its domestic industry in the race to be the leading global AI superpower. Battle has begun.

All Brics but no mortar

There is much fanfare over the decision by the Brics nations – Brazil, Russia, India, China and South Africa – to invite six more countries, including Saudi Arabia and Iran, to join its alliance.

China’s president Xi Jinping calls the move ‘historic’ and an opportunity to reshape a multipolar world and turn global governance upside down.

His one-time opponent, India’s PM Narendra Modi, now cosying up to Xi, also made a big deal of supporting expansion despite the country’s non-aligned status.

Only Brazil president Luiz Inacio Lula da Silva was cautious, saying the Brics should stay multilateral rather than become an exclusive talking shop, to ensure it doesn’t become a ‘Tower of Babel’. Wise words. The new Brics will be a powerful bloc – 3.7billion people and nearly half of the world’s GDP.

But they are diverse: Saudi Arabia and Iran have a history of troubled relations, Saudi, the world’s largest crude oil exporter, is sitting alongside China, the world’s biggest oil importer. Brazil is a farm exporter.

All have different aims: Xi wants to decouple from the dollar while India wants closer links with the West.

Ex-Goldman Sachs economist Jim O’Neill came up with the BRIC acronym over two decades ago to give an easy moniker to several countries that he thought looked promising for investors.

Even then, he said, they had nothing obvious in common. It looks less likely they do now – but expect them to be noisy.

This post first appeared on Dailymail.co.uk