Nvidia is up 167% in 2023. Here's why it's the clear winner in the AI race so far.
Nvidia stock has soared 167% in 2023 as investors wake up to the potential of artificial intelligence.
Nvidia appears best positioned for AI growth as companies rely on its high-tech GPUs to power chatbots like ChatGPT and Bard.
Here's why Nvidia is poised to continue to dominate AI.
Nvidia woke investors up this past week to the fact that artificial intelligence is going to be a very big deal — and very big business.
Shares of Nvidia soared as much as 30% on Thursday, adding almost $200 billion to its market value after the company shared "jaw-dropping" revenue guidance for its AI-powered GPU chips.
The stock is up 167% so far in 2023, and some analysts think there's still plenty of room for growth. Wall Street analysts rushed to boost their price targets on Nvidia on Thursday, with some reaching as high as $500 per share. The stock closed at $389.46 on Friday.
The company has gone from its founding 30 years ago with a focus on video games, to selling "picks and shovels" in the AI gold rush.
Here's why the Santa Clara, California-based firm is pulling ahead of the pack in the AI arms race.
"A true visionary"
"Over a decade ago, [CEO] Jensen Huang understood where the market was going to go, so [Nvidia] invested billions of dollars in not only silicon, but software," Ted Mortonson, tech strategist at Baird, told Insider on Friday. "And Jensen understood where the market was going before the market even materialized, so he is a true visionary,"
Mortonson highlighted the success of Nvidia's H-100 graphic processor unit, which was released last year.
According to Mortonson, the H-100 has enabled "a leapfrog in training, inference, basically generative AI," and it's this specific chip that allowed ChatGPT to make its big debut last November.
While Nvidia has the best chip on hand to power AI capabilities, it also has the right software and silicon stack to keep a competitive moat around its business.
"They have the entire AI silicon stack. And those are basically three components. They have the most advanced GPU, they have advanced networking embedded in the silicon, advanced memory embedded, and they're now developing a new CPU," Mortonson explained.
In other words, Nvidia is a one-stop shop for what companies need to drive their AI ambitions. They control their entire ecosystem, on both the hardware and software side, similar to Apple with its iPhone and iOS system, Mortonson said.
"When you cobble all these things together, it is an integrated immensely powerful AI engine. And they are years ahead of anyone else," Mortonson said, highlighting Nvidia's software development of CUDA, which is far ahead of its closest competition.
Morton was adamant that the success of the company is the result of Huang's foresight, comparing him to other tech icons like Tesla CEO Elon Musk.
"Their expertise in GPUs through their vision got them to the level of basically enabling AI broadly across every single industry. So this is truly through Jensen's leadership, and I think he'll go down as one of the great technologists of our age, along with Elon," Mortonson said.
"Nvidia is clearly going to be the biggest winner"
Equity analyst Angelo Zino at CFRA told Insider that Nvidia deep history of GPU expertise and its current control of the GPU data center market means it will continue to lead the pack in the AI space.
"Nvidia is clearly going to be the biggest winner in our view. They are the inventor of GPUs, invented back in 1999. They own over 95% of market share of the GPU market within the data center space," Zino said.
While CPUs, developed mostly by Intel and to some extent AMD, are unable to handle the large processing power necessary to run AI, Nvidia's GPUs can.
"Over the years, people have realized that these GPUs have the ability to solve some of the most difficult kind of computing problems out there...and Huang had a vision of this eventually taking place," Zino said.
He added that demand for GPUs will make for an enormous market for Nvidia to address, and not just for its core business in gaming and data centers, but for autonomous vehicles and a host of other technologies.
"How they work with these enterprise companies is invaluable and a big reason why we do think that they're likely going to sustain a market share position north of 90% in the foreseeable future," Zino concluded.
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