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Thursday, April 11, 2024

Nvidia predicts explosive future for AI even as gaming graphics revenues plummet by 46%

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Nvidia has released its latest earnings info showing revenues down by 46% in the most recent quarter compared with the same period a year ago. However, with the computing industry on the cusp of an AI revolution, Nvidia is bullish about the future, something the market seems to agree with. The company’s share price is up by over a third since the beginning of the year.

Overall, Nvidia’s revenues for the quarter were down by a lesser 21% for a total of $6.95 billion. That’s because Nvidia’s data center revenue for the period is actually up 11% to $3.61 billion. Gaming graphics revenues for the quarter were $1.83 billion for reference.

So, in the space of a year Nvidia’s gaming graphics has gone from equal to roughly half that of its data center revenues. Yikes.

Notable from the earnings call attended by Nvidia’s head honcho Jensen Huang was virtually no talk of gaming graphics beyond the headline figures. It was all about AI.

The explosion of generative AI models onto the computing scene in recent months, including the likes of ChapGPT and Google’s Bard, is proving to be very good for Nvidia’s prospects. Huang himself has already said that ChatGPT is “one of the greatest things that has ever been done for computing.”

ChatGPT is said to run on around 10,000 Nvidia GPUs and there’s no question that the company currently has a significant competitive advantage in the field when it comes to providing the hardware and software tools for setting up large generative AI training models.

Huang didn’t make specific predictions about where Nvidia’s AI-derived revenues are headed, but he did make it very clear that Nvidia reckons the market is just about to explode.

“There’s no question that this is a very big moment for the computer industry,” Huang says. “In no computing era did one computing platform, ChatGPT, reach 150 million people in 60, 90 days. I mean, this is quite an extraordinary thing.”

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The impact of that in commercial terms, according to Huang, is “a torrent of new companies and new applications that are emerging. There’s no question this is, in every way, a new computing era.”

Huang also said that Nvidia is already working directly with 10,000 AI start-ups around the world, in almost every imaginable industry.

As for what to make of it all for PC gamers, that’s a tricky one. Graphics card revenues are clearly miles off where they were a year ago when the world was a very different place and crypto miners still wanted GPUs. That’s a particularly poor showing given Nvidia has a new line of RTX 40 series GPUs including RTX 4090, RTX 4080 and RTX 4070 Ti, for sale that ought to be bolstering sales.

But more worrying than that is the broader question of just how important gaming graphics will be to Nvidia going forward. The latest figures may be a cyclical blip for gaming graphics, an inevitable downturn after the heady days of stay-at-home and crypto-fuelled GPU demand.

So, some recovery is likely. With Nvidia’s new RTX 40-series laptops now hitting the market, that recovery could be quite rapid.

But it also seems possible that even if Nvidia’s gaming graphics business recovers, it could still soon be dwarfed by its burgeoning AI business. Which does rather beg the question, how much will Nvidia care about gaming graphics? Interesting, if slightly worrying times, indeed.

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