Nvidia is AI race main winner
Nvidia emerges as the clear frontrunner in the race for AI dominance. Nvidia dominates the market. Everyone else simply exists within it, albeit not nearly as comfortably.
The renowned chip manufacturer has not yet released its earnings report for the June quarter. Instead, the company’s announcement will be made at a later date, as its fiscal quarter concluded on July 28. However, the recent reports have brought forth some excellent news for Nvidia. Companies like Amazon.com, Google, Microsoft, and Meta Platforms have all witnessed substantial increases in their capital spending. This surge in investment is primarily directed towards data centers and Nvidia’s cutting-edge artificial intelligence systems, which play a crucial role in powering these facilities.
That’s quite a substantial amount of money. The combined capital spending for those four companies amounted to $58.5 billion for the June quarter. This represents a significant increase of 64% compared to the previous year, marking the largest jump that this group has experienced collectively since 2018, as reported by The Wall Street Journal. The four individuals also predicted that the increased spending would persist throughout the remainder of the year and possibly extend into the following year.
However, the other numbers didn’t quite live up to expectations. Revenue growth for all four companies slowed down compared to the previous quarter. Despite exceeding Wall Street’s expectations and providing a positive outlook, Meta’s stock saw a significant increase of almost 5% on Thursday.
However, Microsoft, Google-parent Alphabet, and Amazon experienced underperformance in certain important business divisions. Amazon performed poorly in that aspect, as its AWS cloud business was the only segment to surpass analysts’ revenue expectations for the quarter. In its latest report on Thursday, the company projected revenue and operating earnings for the September quarter that fell short of expectations. As a result, the stock experienced a decline of over 7% in after-hours trading. Shares of Microsoft and Alphabet also declined after their respective reports.
Apple is not participating in the same AI spending competition as others. However, the company’s results on Thursday demonstrated the significant impact of its integration of generative AI. iPhone revenue experienced a slight decline of 1% compared to the previous year, despite the anticipation of a significant cycle for the innovative smartphone. Apple is incorporating the new AI technology, which was showcased earlier this summer, into its products. However, the company has confirmed that not all the capabilities of its Apple Intelligence platform will be available when its new phones launch, resulting in a slower rollout. The company announced that the revenue growth for the September quarter is expected to be similar to the growth reported for the June period. Apple’s shares experienced a modest increase in after-hours trading on Thursday.
Nvidia is expected to achieve impressive results at the end of the month, thanks to the significant investment in strong AI. Experts predict that data center revenue for the July quarter will reach nearly $25 billion, which is approximately the same amount that the business was generating on an annual basis just one year ago. However, the most recent results do not alleviate the increasing worry among investors regarding the speed at which the world’s biggest tech giants are investing in AI, and whether it will eventually yield positive results.
During the company’s earnings call on Thursday, Amazon CEO Andy Jassy revealed that Amazon is making a substantial investment in the field of artificial intelligence. However, he also acknowledged the company’s impressive track record of strategically expanding its cloud computing business to match customer needs, without incurring unnecessary expenses from surplus capacity. “We are currently experiencing high demand,” he mentioned during the call.
Unfortunately, the demand is not benefiting everyone. Intel’s second-quarter results were less than stellar, with a 3% decline in revenue for its data center and AI segment. Adjusted per-share earnings fell significantly short of Wall Street’s expectations, coming in at around 80% below projections. The company’s previous dominance in traditional server computing chips has now become a vulnerability, as major tech players shift their investments towards Nvidia’s AI systems. Intel has announced its decision to reduce its workforce by over 15% and suspend its dividend, a move that marks a significant change for the company. This decision comes after years of consistently paying dividends, as reported by S&P Global Market Intelligence. The distribution of AI’s wealth is far from being equitable.
